First Solar
Annual Report 2020

Plain-text annual report

Corporate Headquarters 350 West Washington Street, Suite 600 Tempe, AZ 85281 USA Telephone: +1 602 414 9300 Facsimile: +1 602 414 9400 info@firstsolar.com www.firstsolar.com All financial numbers in this report are based on U.S. Generally Accepted Accounting Principles. This letter contains statements other than statements of historical fact, which are subject to risks, uncertainties and other factors as described the company’s filings with Securities and Exchange Commission. These forward-looking statements are qualified in their entirety by the cautionary statements and risk factors contained in the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. ANNUAL REPORT 2020 Corporate Information EXECUTIVE MANAGEMENT Mark Widmar, Chief Executive Officer Alex Bradley, Chief Financial Officer Georges Antoun, Chief Commercial Officer Michael Koralewski, Chief Manufacturing Operations Officer Kuntal Kumar Verma, Chief Manufacturing Engineering Officer Pat Buehler, Chief Quality and Reliability Officer Markus Gloeckler, Chief Technology Officer Caroline Stockdale, Chief People and Communications Officer Jason Dymbort, General Counsel & Secretary BOARD OF DIRECTORS Michael J. Ahearn, Chairman of the Board Sharon L. Allen, Independent Director Richard Chapman, Independent Director George Hambro, Independent Director Kathryn A. Hollister, Independent Director Molly Joseph, Independent Director Craig Kennedy, Independent Director William J. Post, Independent Director Paul H. Stebbins, Independent Director Michael Sweeney, Independent Director Mark Widmar, Director and Chief Executive Officer CORPORATE HEADQUARTERS INVESTOR RELATIONS 350 West Washington Street 350 West Washington Street Suite 600 Tempe, AZ 85281 Suite 600 Tempe, AZ 85281 Telephone +1 602 414 9300 investor@firstsolar.com Facsimile +1 602 414 9400 info@firstsolar.com www.firstsolar.com TRANSFER AGENT STOCK LISTING Computershare Trust Company, N.A. First Solar, Inc. common stock P.O. Box 505000 is traded on the Nasdaq Global Louisville, KY 40233-5002 Select Market, listed under FSLR. Stockholder Services: +1 800 962 4284 www.computershare.com INDEPENDENT AUDITORS PricewaterhouseCoopers LLP First Solar, the First Solar logo, and Leading the World’s Sustainable Energy Future are trademarks of First Solar, Inc., registered in the U.S. and other countries. Series 6, Series 6 Plus, CuRe, Series 6 CuRe, and the Series 6 CuRe logo are trademarks of First Solar, Inc. FIRST SOLAR | ANNUAL REPORT 2020 About First Solar First Solar is a leading global provider of comprehensive photovoltaic (PV) solar solutions, which use its advanced module and system technology. The company’s integrated power plant solutions deliver an economically attractive alternative to fossil- fuel electricity generation today. From raw material sourcing through end-of-life module recycling, First Solar’s renewable energy solutions protect and enhance the environment. FIRST SOLAR | ANNUAL REPORT 2020 To Our Shareholders Since our company’s founding over 20 years ago, the photovoltaic (PV) industry has been through periods of rapid growth, declining costs, and technology evolutions. As one of the few solar companies that both entered and exited this last decade, we have continued to adapt our business model to remain competitive and maintain our differentiation in a constantly evolving market. Despite these transformations, our core identity as a module manufacturing company with a differentiated Cadmium Telluride (CadTel) technology has remained constant. Overall, I am pleased with the commercial implementation of our Series 6 manufacturing roadmap. We started Series 6 commercial production in April of 2018, and exited 2020 with a nameplate manufacturing capacity of 6.3 gigawatts (GW). With six factories currently in operation across a geographically diverse footprint in the United States, Malaysia, and Vietnam, we have a strong platform from which we expect to grow, increasing expected nameplate capacity ~50% by year-end 2022. In 2020, the capabilities of our CadTel technology continued to grow, as we exited the year with average watts per module of 440 and a top production bin of 445 watts. This momentum has continued into 2021, with our modules achieving a top production bin of 450 watts in February. With a mid-term target of a 500 watt module, coupled with an anticipated 50% reduction in our warranted annual degradation rate and an improved temperature coefficient in our Series 6 copper replaced, or CuRe, modules compared to our existing Series 6 modules, we believe the outlook for our technology roadmap is exciting. As we look to the future, our pace of innovation will be critical to our competitive strength, enabling us to leverage our points of differentiation and capture compelling value for our technology. We believe the combination of a differentiated technology and a balanced business model of growth, liquidity, and profitability will enable us to achieve our vision of leading the world’s sustainable energy future, and generate attractive returns for our shareholders. MARK WIDMAR | CEO FIRST SOLAR | ANNUAL REPORT 2020 Year in Review Although 2020 was a very challenging year, I’m proud of the way our team responded with their continued commitment to health and safety, delivering value to our customers, and achieving our objectives in this unprecedented year. In light of continued intense competition from the crystalline- silicon industry, and unforeseen challenges related to the pandemic, we are very pleased with our financial and operational results in 2020. Net sales in 2020 were $2.7 billion, with earnings per share of $3.73. Over the past three years we have invested in six new Series 6 factories, and despite this significant investment, our healthy balance sheet remains a strategic differentiator. Our net-cash position, which includes cash and cash equivalents, restricted cash, and marketable securities, less debt, at year-end was $1.5 billion. OPERATIONS Comparing December 2020 against December 2019, megawatts (MW) produced per day increased to 17.3MW, an increase of 23%. Fleet-wide capacity utilization increased to 117%, an increase of 20 percentage points. Production yield increased to 97.6%, an increase of 3.2 percentage points. Average watts per module increased to 439 watts, an increase of 9 watts, and as noted, our top production bin increased to 445 watts. This strong performance has continued into 2021, with improvements in all key metrics across the fleet since year- end as of February 23, 2021. Additionally, in February we commenced initial production at our second Series 6 factory in Malaysia. By the end of the year, we anticipate our Malaysia factories will have a combined nameplate capacity of 3GW. Finally, we exited 2020 with 6.3GW of nameplate manufacturing capacity, increasing 15% compared to 2019. By increasing average watts per module, throughput, and manufacturing yield, and with the addition of our second Series 6 factory in Malaysia, we anticipate our nameplate manufacturing capacity will increase to 9.4GW by the end of 2022. FIRST SOLAR | ANNUAL REPORT 2020 TECHNOLOGY LEADERSHIP In early 2021, we provided an updated Series 6 efficiency roadmap. Through continued operational improvement, and execution of our efficiency roadmap, we increased our average watts per module to 439 watts with a top production bin of 445 watts at the end of 2020. Today, we are consistently achieving a top production bin of 450 watt modules. Leveraging our existing Series 6 toolset, we increased our module form factor by approximately 2% and increased our module efficiency, increasing our top production bin by approximately 10 watts. After our second Malaysia factory ramp is complete we anticipate our top bin will be 455 watts. Importantly, this increase in form factor is sized to reduce balance-of-system (BoS) cost per watt by adding module wattage without material changes to the installation process or support structures. We anticipate implementing this increase in form factor, which we are calling Series 6 Plus, across the fleet over the course of 2021. By the fourth quarter of 2021, we anticipate commencing the initial production of our copper replaced Series 6 or CuRe, on our lead production line. This program is expected to not only increase module wattage but also meaningfully improve lifetime energy performance. Accordingly, by the end of 2021, we anticipate our top production bin will reach 460 to 465 watts, with an expected 30- year warranted degradation rate approximately 50% below our existing baseline. Improved efficiency, temperature coefficient, and approximately 50% lower degradation MODULE WATTAGE 439W Exit Rate 2020 Average Watts per Module 445W 2020 Top Production Bin 450W Current Top Production Bin 460W-465W Target Exit Rate 2021 Top Production Bin Given that PV power plants have an expected useful life of up to 40 years, a reduction in a module’s long-term degradation is expected to be a material benefit to project economics as it increases the energy density of the module and the lifecycle energy generation. By the end of first quarter of 2022, we anticipate the entire manufacturing fleet will be converted to CuRe. Through the implementation of our copper replacement program, combined with other ongoing R&D programs, we are aiming to achieve a top production bin of 475 to 480 watts by the end of 2022, which represents an acceleration of our previously planned timeline for a 480 watt module in 2023. With a CadTel cell efficiency entitlement in excess of 25%, we see a path to significantly increase our module wattage and efficiency in the mid-term. With this path to increase efficiency, combined with our degradation, spectral response, and temperature coefficient energy advantages, and vertically integrated manufacturing process, we believe the outlook for our technology remains well positioned in the global PV market. FIRST SOLAR | ANNUAL REPORT 2020 QUALITY ADVANTAGES Given PV power plants have an expected useful life of up to 40 years, a module’s warranty, durability, and reliability are material to project economics. Representative of this, early generation First Solar CadTel modules that were installed at a National Renewable Energy Laboratory (NREL) test facility in 1995 are still in operation, and demonstrated a 25-year degradation rate of 48 basis points per year. While our manufacturing process, product design, efficiency, and warranted long-term degradation rate have improved significantly over the past 25 years, this result helps us understand a legacy performance baseline and, we believe, provides further confidence in the superior long-term durability and degradation performance of today’s Series 6 product. As a reflection of confidence in our CadTel technology, we extended our limited power output warranty from 25 to 30 years for our Series 6 modules, and Series 6 modules are now protected by the industry’s first and only product warranty that specifically covers power loss from cell cracking. In certain hail-prone regions such as Texas, where crystalline- silicon products are prone to damage from cell cracking, our cell cracking warranty can result in lower insurance premiums and financing costs for project owners. However, this benefit isn’t isolated to Texas, as hail is a global concern affecting other parts of the Southern and Midwest United States, along with parts of India, Australia, Europe, and China, among other regions. 30YR Power Output Warranty 1st Warranty that Covers Power Loss from Cell Cracking NREL TEST FACILITY FIRST SOLAR FIRST SOLAR | ANNUAL REPORT 2020 RESPONSIBLE SOLAR In an industry that sells electrons, and where products are evaluated by the quantity of electrons that they produce, we also seek to differentiate our business model through our commitment to the environmental footprints of our technology, product circularity, and supply chain transparency. We call it responsible solar, and it includes four primary attributes. Firstly, due to our resource-efficient manufacturing process, our thin film modules have the lowest carbon and water footprints available in the market today. With this advantaged position, Series 6 is the world’s first PV product to be included in the EPEAT register for sustainable electronics, which conforms to NSF 457, the industry’s first sustainability leadership standard. Secondly, our vertically-integrated manufacturing process enables us to produce a CadTel module within a single factory in a matter of hours. This technology advantage enhances our supply chain transparency and control over our end-to-end manufacturing process. Except for First Solar, the other nine companies among the 10 largest PV module manufacturers globally, most of which are linked to China, produce crystalline-silicon modules using a batch-based technology with multiple process steps. None of these manufacturers are fully vertically integrated. They all rely to varying degrees on third-party sourcing of polysilicon, ingots, wafers, and cells, making traceability and supply chain transparency a significant challenge for completed modules. Thirdly, we have over a decade of experience in operating high-value PV recycling facilities on a global scale, and remain the only solar manufacturer to have global in-house recycling capabilities. This recycling process establishes a circular economy by recovering more than 90% of the materials in each processed module, including semiconductor material for reuse in new First Solar modules and glass for use in new glass container products. Finally, we have repeatedly and unequivocally condemned the purported use of forced labor in China’s PV solar supply chain. We will continue to do so for as long as it remains an issue. We also reiterate our commitment to zero tolerance of forced labor throughout our supply chain. We believe there should be no place for a solar panel where even a single component, no matter how small, is produced by a human being against their will. FIRST SOLAR | ANNUAL REPORT 2020 COST COMPETITIVENESS As initially presented during our earnings call in February 2020, we forecasted a Series 6 cost-per-watt reduction of 10% between the end of 2019 and the end of 2020. Despite unforeseen challenges related to the pandemic, pricing pressure in the global shipping market, rising commodity costs including aluminum, which we mitigated in part through a hedge structure, and increased demand for PV glass, we executed on our cost per watt roadmap for the year and achieved this target. While we have made tremendous progress, we believe we have a clear path to reduce module cost-per-watt further. Efficiency improvements generally have little, if any, impact on the cost of producing a module. Therefore, the percentage improvement in watts-per-module can be directly translated into a reduction in cost- per-watt. Throughput improvements, by definition, are leveraged against fixed cost, which results in the incremental volume being produced at the variable cost of the module, or typically the module bill of materials. Going forward, we see the potential to increase throughput, improve manufacturing yield, reduce bill of material costs, primarily across glass and aluminum, and reduce sales freight costs, each of which has the potential to reduce cost-per-watt. We see the potential to increase throughput, improve manufacturing yield, reduce bill of material costs, and reduce sales freight costs to reduce cost-per-watt. FIRST SOLAR | ANNUAL REPORT 2020 MARKET LEADERSHIP 2020 was a strong year with shipments of 5.5GW, bookings of 5.5GW, and an additional 0.7GW of contracted volume that remains subject to conditions precedent. This bookings momentum has continued in 2021, with 1.9GW of additional net bookings between January 1 and February 25, 2021. We believe the strong bookings are evidence of the demand for Series 6 and driven by our customers’ need for certainty, regarding the technology they are investing in, and their supplier’s integrity and ethics. With a mid-to- late stage opportunity pipeline of 12.6GW, which reflects those opportunities we feel could book within the next 12 months, we anticipate our bookings momentum will continue in 2021. PHOTO COURTESY OF: CVE SERIES 6 DEMAND 5.5GW + 0.7GW 2020 Bookings + Contracted 5.5GW 2020 Shipments 1.9GW 2021 Bookings (Jan 1 - Feb 25) 12.6GW Mid-to-Late Stage Opportunity Pipeline FIRST SOLAR | ANNUAL REPORT 2020 Conclusion It is an exciting time for First Solar. As we continue to scale our manufacturing capacity and enhance our differentiated CadTel technology, we are uniquely positioned to play a frontline role in the fight against climate change. Against the backdrop of increasing global demand for solar power with differentiated technology, we have a strong foundation from which to grow. We thank our shareholders for their continued support and for sharing our vision of leading the world’s sustainable energy future. FIRST SOLAR | ANNUAL REPORT 2020 UNITED STATES SECURITIES AND E(cid:46)C(cid:30)ANGE CO(cid:35)(cid:35)ISSION (cid:45)a(cid:66)(cid:55)ingt(cid:62)n, D.C. 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(cid:19)mp(cid:47)o(cid:60)er (cid:23)denti(cid:41)ication (cid:27)o.(cid:4) (cid:14)(cid:16)(cid:11) (cid:45)e(cid:66)t (cid:45)a(cid:66)(cid:55)ingt(cid:62)n Street, Suite (cid:17)(cid:11)(cid:11) Te(cid:60)(cid:63)e, Ari(cid:73)(cid:62)na (cid:19)(cid:16)(cid:13)(cid:19)(cid:12) (cid:3)(cid:15)ddress o(cid:41) principa(cid:47) e(cid:59)ecuti(cid:57)e o(cid:41)(cid:41)ices(cid:5) inc(cid:47)uding (cid:61)ip code(cid:4) (cid:4)(cid:17)(cid:11)(cid:13)(cid:5) (cid:15)(cid:12)(cid:15)(cid:8)(cid:20)(cid:14)(cid:11)(cid:11) (cid:3)Registrant(cid:64)s te(cid:47)ephone num(cid:37)er(cid:5) inc(cid:47)uding area code(cid:4) Se(cid:50)uritie(cid:66) regi(cid:66)tere(cid:51) (cid:63)ur(cid:66)uant t(cid:62) Se(cid:50)ti(cid:62)n (cid:12)(cid:13)(cid:4)(cid:49)(cid:5) (cid:62)(cid:53) t(cid:55)e A(cid:50)t(cid:21) Title (cid:62)(cid:53) ea(cid:50)(cid:55) (cid:50)la(cid:66)(cid:66) Common stock, (cid:4)0.001 par value Tra(cid:51)ing (cid:66)(cid:72)(cid:60)(cid:49)(cid:62)l(cid:4)(cid:66)(cid:5) FSLR Na(cid:60)e (cid:62)(cid:53) ea(cid:50)(cid:55) e(cid:71)(cid:50)(cid:55)ange (cid:62)n (cid:70)(cid:55)i(cid:50)(cid:55) regi(cid:66)tere(cid:51) The NASDA(cid:43) Stock Market LLC Se(cid:50)uritie(cid:66) regi(cid:66)tere(cid:51) (cid:63)ur(cid:66)uant t(cid:62) Se(cid:50)ti(cid:62)n (cid:12)(cid:13)(cid:4)g(cid:5) (cid:62)(cid:53) t(cid:55)e A(cid:50)t(cid:21) N(cid:62)ne Indicate by check mark if the registrant is a well(cid:12)known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been sub(cid:61)ect to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S(cid:12)T ((cid:81)232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non(cid:12)accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of (cid:87)large accelerated filer,(cid:88) (cid:87)accelerated filer,(cid:88) (cid:87)smaller reporting company,(cid:88) and (cid:87)emerging growth company(cid:88) in Rule 12b(cid:12)2 of the Exchange Act. Large accelerated filer Smaller reporting company ☒ ☐ Accelerated filer Emerging growth company ☐ ☐ Non(cid:12)accelerated filer ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation on its management(cid:89)s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes(cid:12)Oxley Act (15 U.S.C. (cid:22)2(cid:21)2(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b(cid:12)2 of the Act). Yes ☐ No ☒ The aggregate market value of the registrant(cid:89)s common stock held by non(cid:12)affiliates of the registrant as of June 30, 2020, the last business day of the registrant(cid:89)s most recently completed second fiscal quarter, was approximately (cid:4)4.1 billion (based on the closing price of the registrant(cid:89)s common stock on that date). As of February 19, 2021, 105,9(cid:23)(cid:21),39(cid:23) shares of the registrant(cid:89)s common stock, (cid:4)0.001 par value per share, were outstanding. DOCU(cid:35)ENTS INCOR(cid:38)ORATED (cid:24)(cid:47) REFERENCE The information required by Part III of this Form 10(cid:12)K, to the extent not set forth herein, is incorporated by reference from the registrant(cid:89)s definitive proxy statement relating to the Annual Meeting of Shareholders to be held in 2021, which will be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Form 10(cid:12)K relates. FIRST SOLAR, INC. FOR(cid:35) (cid:12)(cid:11)(cid:8)(cid:33) FOR T(cid:30)E (cid:47)EAR ENDED DECE(cid:35)(cid:24)ER (cid:14)(cid:12), (cid:13)(cid:11)(cid:13)(cid:11) TA(cid:24)LE OF CONTENTS (cid:38)ART I Item 1. Item 1A. Item 1B. Item 2. Item 3. Item 4. Item 5. Item (cid:21). Item (cid:22). Item (cid:22)A. Item (cid:23). Item 9. Item 9A. Item 9B. Item 10. Item 11. Item 12. Item 13. Item 14. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Information about Our Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:38)ART II Market for Registrant(cid:89)s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management(cid:89)s Discussion and Analysis of Financial Condition and Results of Operations . . . (cid:43)uantitative and (cid:43)ualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:38)ART III Directors, Executive Officers, and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:38)age 3 1(cid:22) 20 49 49 50 50 50 52 53 (cid:22)3 (cid:22)(cid:21) (cid:22)(cid:21) (cid:22)(cid:21) (cid:22)(cid:22) (cid:22)(cid:23) (cid:22)(cid:23) (cid:22)(cid:23) (cid:22)9 (cid:22)9 Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Form 10(cid:12)K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 1(cid:21). Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:22)9 143 144 (cid:38)ART I(cid:44) Throughout this Annual Report on Form 10(cid:12)K, we refer to First Solar, Inc. and its consolidated subsidiaries as (cid:87)First Solar,(cid:88) (cid:87)the Company,(cid:88) (cid:87)we,(cid:88) (cid:87)us,(cid:88) and (cid:87)our.(cid:88) When referring to our manufacturing capacity, total sales, and solar module sales, the unit of electricity in watts for megawatts ((cid:87)MW(cid:88)) and gigawatts ((cid:87)GW(cid:88)) is direct current ((cid:87)DC(cid:88) or (cid:87)DC(cid:88)) unless otherwise noted. When referring to our pro(cid:61)ects or systems, the unit of electricity in watts for MW and GW is alternating current ((cid:87)AC(cid:88) or (cid:87)AC(cid:88)) unless otherwise noted. NOTE REGARDING FOR(cid:45)ARD(cid:8)LOO(cid:33)ING STATE(cid:35)ENTS This Annual Report on Form 10(cid:12)K contains forward(cid:12)looking statements within the meaning of the Securities Exchange Act of 1934, as amended (the (cid:87)Exchange Act(cid:88)), and the Securities Act of 1933, as amended (the (cid:87)Securities Act(cid:88)), which are sub(cid:61)ect to risks, uncertainties, and assumptions that are difficult to predict. All statements in this Annual Report on Form 10(cid:12)K, other than statements of historical fact, are forward(cid:12)looking statements. These forward(cid:12)looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward(cid:12)looking statements include statements, among other things, concerning: the length and severity of the ongoing CO(cid:48)ID(cid:12)19 (novel coronavirus) outbreak, including its impacts across our businesses on demand, manufacturing, pro(cid:61)ect development, construction, operations and maintenance, financing, and our global supply chains, actions that may be taken by governmental authorities to contain the CO(cid:48)ID(cid:12)19 outbreak or to treat its impacts, and the ability of our customers, suppliers, equipment vendors, and other counterparties to fulfill their contractual obligations to us(cid:26) effects resulting from certain module manufacturing changes(cid:26) our business strategy, including anticipated trends and developments in and management plans for our business and the markets in which we operate(cid:26) future financial results, operating results, revenues, gross margin, operating expenses, products, pro(cid:61)ected costs (including estimated future module collection and recycling costs), warranties, solar module technology and cost reduction roadmaps, restructuring, product reliability, investments, and capital expenditures(cid:26) our ability to continue to reduce the cost per watt of our solar modules(cid:26) the impact of public policies, such as tariffs or other trade remedies imposed on solar cells and modules(cid:26) effects resulting from pending litigation(cid:26) our ability to expand manufacturing capacity worldwide(cid:26) our ability to reduce the costs to develop and construct photovoltaic ((cid:87)P(cid:48)(cid:88)) solar power systems(cid:26) research and development ((cid:87)R(cid:6)D(cid:88)) programs and our ability to improve the wattage of our solar modules(cid:26) sales and marketing initiatives(cid:26) and competition. In some cases, you can identify these statements by forward(cid:12)looking words, such as (cid:87)estimate,(cid:88) (cid:87)expect,(cid:88) (cid:87)anticipate,(cid:88) (cid:87)pro(cid:61)ect,(cid:88) (cid:87)plan,(cid:88) (cid:87)intend,(cid:88) (cid:87)seek,(cid:88) (cid:87)believe,(cid:88) (cid:87)forecast,(cid:88) (cid:87)foresee,(cid:88) (cid:87)likely,(cid:88) (cid:87)may,(cid:88) (cid:87)should,(cid:88) (cid:87)goal,(cid:88) (cid:87)target,(cid:88) (cid:87)might,(cid:88) (cid:87)will,(cid:88) (cid:87)could,(cid:88) (cid:87)predict,(cid:88) (cid:87)continue,(cid:88) and the negative or plural of these words, and other comparable terminology. Forward(cid:12)looking statements are only predictions based on our current expectations and our pro(cid:61)ections about future events. All forward(cid:12)looking statements included in this Annual Report on Form 10(cid:12)K are based upon information available to us as of the filing date of this Annual Report on Form 10(cid:12)K and therefore speak only as of the filing date. You should not place undue reliance on these forward(cid:12)looking statements. We undertake no obligation to update any of these forward(cid:12)looking statements for any reason, whether as a result of new information, future developments, or otherwise. These forward(cid:12)looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to differ materially from those expressed or implied by these statements, including, but not limited to: (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) structural imbalances in global supply and demand for P(cid:48) solar modules(cid:26) our competitive position and other key competitive factors(cid:26) the market for renewable energy, including solar energy(cid:26) the reduction, elimination, or expiration of government subsidies, policies, and support programs for solar energy pro(cid:61)ects(cid:26) our ability to execute on our solar module technology and cost reduction roadmaps(cid:26) our ability to improve the wattage of our solar modules(cid:26) the impact of public policies, such as tariffs or other trade remedies imposed on solar cells and modules(cid:26) the severity and duration of the CO(cid:48)ID(cid:12)19 pandemic, including its potential impact on the Company(cid:89)s business, financial condition, and results of operations(cid:26) 1 (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) interest rate fluctuations and both our and our customers(cid:89) ability to secure financing(cid:26) our ability to execute on our long(cid:12)term strategic plans(cid:26) the loss of any of our large customers, or the ability of our customers and counterparties to perform under their contracts with us(cid:26) the creditworthiness of our off(cid:12)take counterparties and the ability of our off(cid:12)take counterparties to fulfill their contractual obligations to us(cid:26) the satisfaction of conditions precedent in our sales agreements(cid:26) our ability to attract new customers and to develop and maintain existing customer and supplier relationships(cid:26) claims under our limited warranty obligations(cid:26) the supply and price of components and raw materials, including CdTe(cid:26) our ability to convert existing or construct production facilities to support new product lines(cid:26) future collection and recycling costs for solar modules covered by our module collection and recycling program(cid:26) our ability to protect our intellectual property(cid:26) our continued investment in R(cid:6)D(cid:26) our ability to successfully develop and complete our systems business pro(cid:61)ects(cid:26) our ability to attract and retain key executive officers and associates(cid:26) changes in, or the failure to comply with, government regulations and environmental, health, and safety requirements(cid:26) general economic and business conditions, including those influenced by U.S., international, and geopolitical events(cid:26) environmental responsibility, semiconductor materials(cid:26) including with respect to cadmium telluride ((cid:87)CdTe(cid:88)) and other our ability to prevent and/or minimize the impact of cyber(cid:12)attacks or other breaches of our information systems(cid:26) effects arising from pending litigation(cid:26) and all other matters discussed in Item 1A. (cid:87)Risk Factors(cid:88) and elsewhere in this Annual Report on Form 10(cid:12)K, our subsequently filed (cid:43)uarterly Reports on Form 10(cid:12)(cid:43), and our other filings with the Securities and Exchange Commission (the (cid:87)SEC(cid:88)). You should carefully consider the risks and uncertainties described under this section. 2 Ite(cid:60) (cid:12). (cid:14)u(cid:53)(cid:43)(cid:48)(cid:39)(cid:53)(cid:53) C(cid:62)(cid:60)(cid:63)an(cid:72) O(cid:69)er(cid:69)ie(cid:70) (cid:38)ART I We are a leading global provider of P(cid:48) solar energy solutions. We design, manufacture, and sell P(cid:48) solar modules with an advanced thin film semiconductor technology. In certain markets, we also develop and sell P(cid:48) solar power systems that primarily use the modules we manufacture and provide operations and maintenance ((cid:87)O(cid:6)M(cid:88)) services to system owners. We have substantial, ongoing R(cid:6)D efforts focused on various technology innovations. We are the world(cid:89)s largest thin film P(cid:48) solar module manufacturer and the largest P(cid:48) solar module manufacturer in the Western Hemisphere. In addressing the overall global demand for electricity, our CdTe modules, which leverage our Series (cid:21)TM ((cid:87)Series (cid:21)(cid:88)) module technology, compete favorably on an economic basis with traditional forms of energy generation and provide low cost electricity to end users. Our diverse capabilities facilitate the sale of these solutions and the adoption of our technology in key markets around the world. We believe our strategies and points of differentiation provide the foundation for our competitive position and enable us to remain one of the preferred providers of P(cid:48) solar modules. (cid:24)u(cid:66)ine(cid:66)(cid:66) Strateg(cid:72) (cid:16)(cid:43)(cid:40)(cid:40)(cid:39)r(cid:39)(cid:48)(cid:54)(cid:43)a(cid:54)(cid:39)(cid:38) (cid:31)(cid:39)(cid:37)(cid:42)(cid:48)o(cid:46)o(cid:41)y As a field(cid:12)proven technology, our CdTe solar modules offer certain advantages over conventional crystalline silicon solar modules by delivering competitive efficiency, higher real(cid:12)world energy yield, and long(cid:12)term reliability. Proven to deliver up to (cid:23)(cid:5) more usable energy per nameplate watt than crystalline silicon technologies in certain geographic markets and with a record of reliable system performance, our CdTe technology delivers more energy over the lifetime of a P(cid:48) solar power system. Our Series (cid:21) module technology, with its combination of high wattage, low manufacturing costs, and balance of systems ((cid:87)BoS(cid:88)) component compatibility, has further enhanced our competitive position since the launch of such technology in 201(cid:23). In terms of energy yield, in many climates our CdTe solar modules provide an energy production advantage over crystalline silicon solar modules of equivalent efficiency rating. For example, our CdTe solar modules provide a superior temperature coefficient, which results in stronger system performance in typical high insolation climates as the ma(cid:61)ority of a system(cid:89)s generation, on average, occurs when module temperatures are well above 25(cid:80)C (standard test conditions). In addition, our CdTe solar modules provide a superior spectral response in humid environments where atmospheric moisture alters the solar spectrum relative to laboratory standards. Our CdTe solar modules also provide a better partial shading response than conventional crystalline silicon solar modules, which may experience significantly lower energy generation than CdTe solar modules when partial shading occurs. As a result of these and other factors, our P(cid:48) solar modules typically produce more annual energy in real world field conditions than conventional modules with the same nameplate capacity. Furthermore, our thin(cid:12)film CdTe semiconductor technology is immune to cell cracking and its resulting power output loss, a common failure often observed in crystalline silicon modules caused by poor manufacturing, handling, weather, or other conditions. (cid:24)a(cid:48)u(cid:40)a(cid:37)(cid:54)ur(cid:43)(cid:48)(cid:41) (cid:27)ro(cid:37)(cid:39)(cid:53)(cid:53) Our modules are manufactured in a high(cid:12)throughput, automated environment that integrates all manufacturing steps into a continuous flow line. Such manufacturing process eliminates the multiple supply chain operators and resource(cid:12)intensive batch processing steps that are used to produce crystalline silicon solar modules, which typically occur over several days and across multiple factories. At the outset of the production of our modules, a sheet of glass enters the production line and in a matter of hours is transformed into a completed module, which is flash tested, 3 packaged, and ready for shipment. With more than 30 GWDC of modules sold worldwide, we have a demonstrated history of manufacturing success and innovation. We have a global manufacturing footprint with facilities based in the United States, Malaysia, and (cid:48)ietnam. (cid:16)(cid:43)(cid:56)(cid:39)r(cid:53)(cid:43)(cid:40)(cid:43)(cid:39)(cid:38) (cid:15)a(cid:50)a(cid:36)(cid:43)(cid:46)(cid:43)(cid:54)(cid:43)(cid:39)(cid:53) We are diversified across the solar value chain. Many of the efficiencies and capabilities that we deliver to our customers are not easily replicable for other industry participants that are not diversified in a similar manner. Accordingly, our operational model offers P(cid:48) solar energy solutions that benefit from our wide range of capabilities, including advanced P(cid:48) solar module manufacturing and, in certain markets, pro(cid:61)ect development, construction management services, and O(cid:6)M services. F(cid:43)(cid:48)a(cid:48)(cid:37)(cid:43)a(cid:46) (cid:33)(cid:43)a(cid:36)(cid:43)(cid:46)(cid:43)(cid:54)y We are committed to creating long(cid:12)term shareholder value through a decision(cid:12)making framework that delivers a balance of growth, profitability, and liquidity. This framework has enabled us to fund our Series (cid:21) manufacturing and capacity expansion initiatives using cash flows generated by our operations despite substantial downward pressure on the price of solar modules and systems due to competition, demand fluctuations, and significant overcapacity in the industry. Our financial viability provides strategic optionality as we evaluate how to invest in our business and generate returns for our shareholders. Our financial viability and bankability also enable us to offer meaningful warranties, which provide us with a competitive advantage relative to many of our peers in the solar industry in the context of pro(cid:61)ect financing and offering P(cid:48) solar energy solutions to long(cid:12)term owners. Furthermore, we expect our financial discipline and ability to manage operating costs to enhance our profitability as we continue to scale our business. Su(cid:53)(cid:54)a(cid:43)(cid:48)a(cid:36)(cid:43)(cid:46)(cid:43)(cid:54)y In addition to our financial commitments, we are also committed to minimizing the environmental impacts and enhancing the social and economic benefits of our products across their life cycle, from raw material sourcing through end(cid:12)of(cid:12)life module recycling. Our thin film modules are manufactured in a high(cid:12)throughput, automated environment that integrates all manufacturing steps into a continuous(cid:12)flow operation, using less energy, water, and semiconductor material than conventional crystalline silicon. Accordingly, our modules and systems provide an ecologically leading solution to climate change, energy security, and water scarcity, which also enables our customers to achieve their sustainability ob(cid:61)ectives. On a lifecycle basis, our thin film module technology has the fastest energy payback time, smallest carbon footprint, and lowest water use of any P(cid:48) solar technology on the market. The energy payback time, which is the amount of time a system must operate to recover the energy required to produce it, of our module technology is facilitated by our specialized manufacturing process. In less than six months under high irradiance conditions, our systems produce more energy than was required to create them. This energy payback time represents a 50(cid:12)fold energy return on investment over a theoretical 25(cid:12)year system lifetime and an abundant net energy gain to the electricity grid. Furthermore, our module technology displaces up to 9(cid:23)(cid:5) of greenhouse gas emissions and other air pollutants when replacing traditional forms of energy generation. Our modules also use up to 400 times less water per MW hour than conventional energy sources and up to 24 times less water than other P(cid:48) solar modules. In addition, our industry(cid:12)leading recycling process further enhances our sustainability advantage by recovering approximately 90(cid:5) of the glass for reuse in new glass products and over 90(cid:5) of the semiconductor material for reuse in new modules. During 2020 our Series (cid:21) modules became the world(cid:89)s first P(cid:48) product to be included in the Electronic Products Environmental Assessment Tool ((cid:87)EPEAT(cid:88)) Registry(cid:89)s Photovoltaic and Inverters product category. The EPEAT Registry enables the identification of credible sustainable electronic products from a broad range of manufacturers based on several factors, including the product(cid:89)s raw materials, manufacturing energy, water use, product packaging, end(cid:12)of(cid:12)life recycling, and corporate responsibility. 4 O(cid:53)(cid:53)ering(cid:66) an(cid:51) Ca(cid:63)a(cid:49)ilitie(cid:66) We are focusing on markets and energy applications in which solar power can be a least(cid:12)cost, best(cid:12)fit energy solution, particularly in regions with high solar resources, significant current or pro(cid:61)ected electricity demand, and/or relatively high existing electricity prices. We differentiate our product offerings by geographic market and localize the solution, as needed. Our consultative approach to our customers(cid:89) solar energy needs and capabilities results in customized solutions to meet their economic goals. As a result, we have designed our product and service offerings according to the following business areas: (cid:62) (cid:62) P(cid:34) (cid:31)o(cid:47)ar (cid:26)odu(cid:47)es. Our modules couple our leading(cid:12)edge CdTe technology with the manufacturing excellence and quality control that comes from being one of the world(cid:89)s most experienced producers of advanced P(cid:48) solar modules. Our technology demonstrates certain performance advantages over crystalline silicon solar modules of equivalent efficiency rating by delivering higher real(cid:12)world energy yield and long(cid:12) term reliability. We are able to provide such product performance, quality, and reliability to our customers due, in large part, to our consistent and sustained investments in R(cid:6)D activities. Po(cid:58)er P(cid:47)ant (cid:31)o(cid:47)utions. In certain markets, we develop and sell P(cid:48) solar power systems that primarily use the modules we manufacture and provide O(cid:6)M services to optimize system performance and comply with pro(cid:61)ect agreements and regulations. Our grid(cid:12)connected systems support a diversified energy portfolio, reduce fossil(cid:12)fuel consumption, mitigate the risk of fuel price volatility, and save costs, proving that centralized solar generation can deliver dependable and affordable solar electricity to the grid around the world. Additional benefits of our grid(cid:12)connected power systems include reductions of fuel imports and improvements in energy security, faster time(cid:12)to(cid:12)power, and managed variability through accurate forecasting. Our products and services are engineered to enable the maximization of energy output and revenue for our customers while significantly reducing their unplanned maintenance costs. Following an evaluation of the long(cid:12)term cost structure, competitiveness, and risk(cid:12)ad(cid:61)usted returns of our O(cid:6)M services business, we received an offer to purchase certain portions of the business and determined it is in the best interest of our stockholders to pursue this transaction. As a result, in August 2020 we entered into an agreement with a subsidiary of Clairvest Group, Inc. ((cid:87)Clairvest(cid:88)) for the sale of our North American O(cid:6)M operations. The completion of the transaction is contingent on a number of closing conditions, including the receipt of certain third(cid:12) party consents and other customary closing conditions. Assuming satisfaction of such closing conditions, we expect the sale to be completed in the first half of 2021. Following an evaluation of the long(cid:12)term cost structure, competitiveness, and risk(cid:12)ad(cid:61)usted returns of our U.S. pro(cid:61)ect development business, we have determined it is in the best interest of our stockholders to pursue the sale of this business. On January 24, 2021, we entered into an agreement with a subsidiary of the Ontario Municipal Employees Retirement System ((cid:87)OMERS(cid:88)) for the sale of our U.S. pro(cid:61)ect development operations, which comprises the business of developing, contracting for the construction of, and selling utility(cid:12)scale P(cid:48) solar power systems. The transaction includes our approximately 10 GWAC utility(cid:12)scale solar pro(cid:61)ect pipeline, including the advanced(cid:12)stage Horizon, Madison, Ridgely, Rabbitbrush, and Oak Trail pro(cid:61)ects that are expected to commence construction in the next two years(cid:26) the 30 MWAC Barilla Solar pro(cid:61)ect, which is operational(cid:26) and certain other equipment. In addition, OMERS has agreed to certain module purchase commitments. The completion of the transaction is contingent on a number of closing conditions, including the receipt of regulatory approval from the U.S. Federal Energy Regulatory Commission ((cid:87)FERC(cid:88)), the expiration of the mandatory waiting period under U.S. antitrust laws, a review of the transaction by the Committee on Foreign Investment in the United States ((cid:87)CFIUS(cid:88)), and other customary closing conditions. Assuming satisfaction of such closing conditions, we expect the sale to be completed in the first half of 2021. 5 (cid:35)ar(cid:58)et O(cid:69)er(cid:69)ie(cid:70) Solar energy is one of the fastest growing forms of renewable energy with numerous economic and environmental benefits that make it an attractive complement to and/or substitute for traditional forms of energy generation. In recent years, the price of P(cid:48) solar power systems, and accordingly the cost of producing electricity from such systems, has dropped to levels that are competitive with or below the wholesale price of electricity in many markets. This rapid price decline has opened new possibilities to develop systems in many locations with limited or no financial incentives. Other technological developments in the industry, such as the advancement of energy storage capabilities, have further enhanced the prospects of solar energy as an alternative to traditional forms of energy generation. Furthermore, the fact that a P(cid:48) solar power system requires no fuel provides a unique and valuable hedging benefit to owners of such systems relative to traditional energy generation assets. Once installed, P(cid:48) solar power systems can function for over 35 years with relatively less maintenance or oversight compared to many other forms of generation. In addition to these economic benefits, solar energy has substantial environmental benefits. For example, P(cid:48) solar power systems generate no greenhouse gas or other emissions and use minimal amounts of water compared to traditional energy generation assets. Worldwide solar markets continue to develop, aided by the above factors as well as demand elasticity resulting from declining industry average selling prices, both at the module and system level, which have made solar power one of the most economically attractive sources of energy. Module average selling prices in many global markets have declined in recent years and are expected to continue to decline to some degree in the future. In the aggregate, we believe manufacturers of solar cells and modules have significant installed production capacity, relative to global demand, and the ability for additional capacity expansion. We believe the solar industry may from time to time experience periods of structural imbalance between supply and demand (i.e., where production capacity exceeds global demand), and that such periods will continue to put pressure on pricing. Additionally, intense competition at the system level may result in an environment in which pricing falls rapidly, thereby further increasing demand for solar energy solutions but constraining the ability for pro(cid:61)ect developers and diversified module manufacturers to sustain meaningful and consistent profitability. In light of such market realities, we are focusing on our strategies and points of differentiation, which include our advanced module technology, our manufacturing process, our diversified capabilities, our financial viability, and the sustainability advantage of our modules and systems. Gl(cid:62)(cid:49)al (cid:35)ar(cid:58)et(cid:66) We have established and continue to develop a global business presence. Energy markets are, by their nature, localized, with different drivers and market forces impacting electricity generation and demand in a particular region or for a particular application. Accordingly, our business is evolving worldwide and is shaped by the varying ways in which our offerings can be compelling and economically viable solutions to energy needs in various markets. Due to the CO(cid:48)ID(cid:12)19 pandemic, market growth in certain geographies in which we operate has slowed. For a detailed discussion of the impact of, and potential risks arising from, the CO(cid:48)ID(cid:12)19 pandemic on our business, see Item 1A. (cid:87)Risk Factors (cid:85) The CO(cid:48)ID(cid:12)19 pandemic could materially impact our business, financial condition, and results of operations.(cid:88) We are currently focusing on markets, including those listed below, in which our CdTe solar modules provide certain advantages over conventional crystalline silicon solar modules, including high insolation climates in which our modules provide a superior temperature coefficient, humid environments in which our modules provide a superior spectral response, and markets that favor the superior sustainability profile of our P(cid:48) solar technology. To the extent our production capacity expands in future periods, we have the potential to extend our focus to additional geographic markets. (cid:33)nited (cid:31)tates. Multiple markets within the United States, which accounted for (cid:21)(cid:23)(cid:5) of our 2020 net sales, exemplify favorable characteristics for a solar market, including (i) sizeable electricity demand, particularly around growing population centers and industrial areas(cid:26) (ii) strong demand for renewable energy generation(cid:26) and (iii) abundant solar resources. In those areas and applications in which these factors are more pronounced, our P(cid:48) solar energy solutions (cid:21) compete favorably on an economic basis with traditional forms of energy generation. The market penetration of P(cid:48) solar is also impacted by certain federal and state support programs, including the federal investment tax credit, as described below under (cid:87)Support Programs.(cid:88) (cid:24)apan. Japan(cid:89)s electricity markets have various characteristics, which make them attractive markets for P(cid:48) solar energy. In particular, Japan has few domestic fossil fuel resources and relies heavily on fossil fuel imports. Following the Fukushima earthquake in 2011, the country introduced certain initiatives to limit its reliance on nuclear power. Accordingly, the Japanese government announced a long(cid:12)term goal of dramatically increasing installed solar power capacity and provided various incentives for solar power installations. In recent years, we have partnered with local companies to develop, construct, sell, and operate various P(cid:48) solar power systems, which are expected to mitigate Japan(cid:89)s dependence on fossil fuel imports and nuclear power. In 2020, we completed the sale of multiple pro(cid:61)ects in Japan totaling 11(cid:21) MWAC and expect to continue providing O(cid:6)M services to such pro(cid:61)ects in the future. We continue to pursue other utility(cid:12)scale pro(cid:61)ect development, O(cid:6)M, and module sale opportunities in the country. (cid:19)urope. Most markets across Europe reflect strong demand for P(cid:48) solar energy due to its ability to compete economically with more traditional forms of energy generation. In particular, France, Germany, Greece, Italy, the Netherlands, Portugal, and Spain are all running tenders in which utility(cid:12)scale P(cid:48) solar pro(cid:61)ects can bid for capacity. Such tenders and other recent market developments indicate the potential for further growth in the demand for P(cid:48) solar energy beyond the region(cid:89)s installed generation capacity of approximately 135 GWDC. Due to the CO(cid:48)ID(cid:12)19 pandemic, the market growth in Europe has slowed, and the utility(cid:12)scale market has experienced some delays in both tenders and installations. We continue to pursue module sales activities in many of the countries mentioned above. (cid:23)ndia. India continues to represent one of the largest and fastest growing markets for P(cid:48) solar energy with an installed generation capacity of over 3(cid:21) GWDC and over 20 GWDC of new procurement programs announced. In addition, the government has established aggressive renewable energy targets, which include increasing the country(cid:89)s solar capacity to 100 GWAC by 2022, and the overall renewable energy target of 450 GWDC of installed capacity by 2030. These targets, along with various policy and regulatory measures, help create significant and sustained demand for P(cid:48) solar energy. Accordingly, we expect to continue selling modules to market participants to address the region(cid:89)s energy needs. In 2020, we completed the sale of our Anantapur and Tungabhadra pro(cid:61)ects located in Telangana and Karnataka, respectively, which total 40 MWAC. In addition, we continue to maintain our strong module presence in India with approximately 2 GWDC of installed modules. Su(cid:63)(cid:63)(cid:62)rt (cid:38)r(cid:62)gra(cid:60)(cid:66) Although we compete in many markets that do not require solar(cid:12)specific government subsidies or support programs, our net sales and profits remain sub(cid:61)ect, in the near term, to variability based on the availability and size of government subsidies and economic incentives, such as quotas, renewable portfolio standards, and tendering systems. In addition to these support programs, financial incentives for P(cid:48) solar energy generation may include tax and production incentives. Additionally, to address the near(cid:12)term business disruption caused by the CO(cid:48)ID(cid:12)19 pandemic, many governments have proposed policies or support programs intended to stimulate their respective economies. Such support programs may include additional incentives for renewable energy pro(cid:61)ects, including P(cid:48) solar power systems, over several years. Although we expect to become less impacted by and less dependent on these forms of government support over time, such programs continue to influence the demand for P(cid:48) solar energy around the world. In Europe, renewable energy targets, in con(cid:61)unction with tenders for utility(cid:12)scale P(cid:48) solar and other support measures, have contributed to growth in P(cid:48) solar markets. Renewable energy targets prescribe how much energy consumption must come from renewable sources, while incentive policies and competitive tender policies are investors. (cid:48)arious intended development providing certainty support supply new by to to (cid:22) European Union ((cid:87)EU(cid:88)) directives on renewable energy have set targets for all EU member states in support of the recently revised goal of a 55(cid:5) share of energy from renewable sources in the EU by 2030. Tax incentive programs exist in the United States at both the federal and state level and can take the form of investment and production tax credits, accelerated depreciation, and sales and property tax exemptions and abatements. At the federal level, investment tax credits for business and residential solar systems have gone through several cycles of enactment and expiration since the 19(cid:23)0s. In 2015, the U.S. Congress extended the 30(cid:5) federal energy investment tax credit ((cid:87)ITC(cid:88)) for both residential and commercial solar installations through 2019. Among other requirements, such credits require pro(cid:61)ects to have commenced construction by a certain date, which may be achieved by certain qualifying procurement activities. Accordingly, pro(cid:61)ects that commenced construction in 2019 were eligible for the 30(cid:5) ITC. The ITC stepped down to 2(cid:21)(cid:5) for pro(cid:61)ects that commenced construction in 2020. In December 2020, the U.S. Congress extended the 2(cid:21)(cid:5) ITC through 2022 as part of its CO(cid:48)ID(cid:12)19 relief efforts. As a result of this extension, the ITC will step down to 22(cid:5) for pro(cid:61)ects that commence construction in 2023 and 10(cid:5) for pro(cid:61)ects that commence construction thereafter. The ITC has been an important economic driver of solar installations and qualifying procurement activities in the United States, and its extension has contributed to greater medium(cid:12)term demand. The positive impact of the ITC depends to a large degree on the availability of tax equity for pro(cid:61)ect financing, and any significant reduction in the availability of tax equity in the future could make it more difficult to develop and construct pro(cid:61)ects requiring financing. The ma(cid:61)ority of states in the United States have also enacted legislation adopting Renewable Portfolio Standard ((cid:87)RPS(cid:88)) mechanisms. Under an RPS, regulated utilities and other load serving entities are required to procure a specified percentage of their total retail electricity sales to end(cid:12)user customers from eligible renewable resources, such as solar energy generation facilities, by a specified date. Some programs may further require that a specified portion of the total percentage of renewable energy must come from solar generation facilities or other technologies. RPS mechanisms and other legislation vary significantly from state to state, particularly with respect to the percentage of renewable energy required to achieve the state(cid:89)s RPS, the definition of eligible renewable energy resources, and the extent to which renewable energy credits qualify for RPS compliance. Measured in terms of the volume of renewable electricity required to meet its RPS mandate, California(cid:89)s RPS program is one of the most significant in the United States. In addition to serving as a template for other states, the California market for renewable energy has historically been a key region for First Solar and has led the western United States in renewable energy demand for the past several years. First enacted in 2002, California(cid:89)s RPS statute has been amended several times to increase the overall percentage requirement as well as to accelerate the target date for program compliance. Pursuant to the passage of SB100 by the California legislature in 201(cid:23), the California RPS program requires utilities and other obligated load serving entities to procure (cid:21)0(cid:5) of their total retail electricity demand from eligible renewable resources by 2030 and 100(cid:5) of such electricity demand from carbon(cid:12)free resources by 2045. (cid:48)arious proposed and contemplated environmental and tax policies may create regulatory uncertainty in the renewable energy sector, including the solar energy sector, and may lead to a reduction or removal of various clean energy programs and initiatives designed to curtail climate change. For more information about the risks associated with these potential government actions, see Item 1A. (cid:87)Risk Factors (cid:85) The reduction, elimination, or expiration of government subsidies, economic incentives, tax incentives, renewable energy targets, and other support for on(cid:12)grid solar electricity applications, or other public policies, such as tariffs or other trade remedies imposed on solar cells and modules, could negatively impact demand and/or price levels for our solar modules and systems and limit our growth or lead to a reduction in our net sales or increase our costs, thereby adversely impacting our operating results.(cid:88) (cid:23) (cid:24)u(cid:66)ine(cid:66)(cid:66) Seg(cid:60)ent(cid:66) We operate our business in two segments. Our modules segment involves the design, manufacture, and sale of CdTe solar modules, which convert sunlight into electricity. Third(cid:12)party customers of our modules segment include integrators and operators of P(cid:48) solar power systems. Our second segment is our systems segment, through which we provide power plant solutions in certain markets, which include (i) pro(cid:61)ect development, (ii) engineering, procurement, and construction ((cid:87)EPC(cid:88)) services, and (iii) O(cid:6)M services. We may provide any combination of individual products and services within such capabilities (including, with respect to EPC services, by contracting with third parties) depending upon the customer and market opportunity. Our systems segment customers include utilities, independent power producers, commercial and industrial companies, and other system owners. As part of our systems segment, we may also temporarily own and operate certain of our systems for a period of time based on strategic opportunities or market factors. See Note 20. (cid:87)Segment and Geographical Information(cid:88) to our consolidated financial statements for further information regarding our business segments. (cid:24)o(cid:38)u(cid:46)(cid:39)(cid:53) (cid:14)u(cid:53)(cid:43)(cid:48)(cid:39)(cid:53)(cid:53) (cid:31)o(cid:47)ar (cid:26)odu(cid:47)es Since the inception of First Solar, our flagship module has used our advanced thin film semiconductor technology. In April 201(cid:23), we commenced commercial production of our Series (cid:21) module technology, which represents the latest generation of our flagship module. Each Series (cid:21) module is a glass laminate approximately 4ft x (cid:21)ft (123cm x 201cm) in size that encapsulates thin film semiconductor materials. At the end of 2020, our Series (cid:21) modules had an average power output of 439 watts. Our modules offer up to (cid:23)(cid:5) more energy than certain crystalline silicon solar modules of equivalent nameplate capacity and generally include anti(cid:12)reflective coated glass, which enhances energy production. Our module semiconductor structure is a single(cid:12)(cid:61)unction polycrystalline thin film that uses CdTe as the absorption layer. CdTe has absorption properties that are well matched to the solar spectrum and can deliver competitive wattage using approximately 1(cid:12)2(cid:5) of the amount of semiconductor material used to manufacture conventional crystalline silicon modules. Due to its minimal thickness, our thin(cid:12)film CdTe semiconductor technology is also immune to cell cracking and its resulting power output loss, a common failure often observed in crystalline silicon modules caused by poor manufacturing, handling, weather, or other conditions. (cid:26)anu(cid:41)acturing Process We manufacture our solar modules on integrated production lines in an automated, proprietary, and continuous process, which includes the following three stages: (i) the deposition stage, (ii) the cell definition and treatment stage, and (iii) the assembly and test stage. In the deposition stage, panels of transparent oxide(cid:12)coated glass are robotically loaded onto the production line where they are cleaned, laser(cid:12)mark identified with a serial number, heated, and coated with thin layers of CdTe and other semiconductor materials using our proprietary vapor transport deposition technology, after which the semiconductor(cid:12)coated plates are cooled rapidly to increase glass strength. In the cell definition and treatment stage, we use high(cid:12)speed lasers to transform the large continuous semiconductor coating on the glass plate into a series of interconnected cells that deliver the desired current and voltage output. In this stage, we also treat the semiconductor film using proprietary chemistries and processes to improve the device(cid:89)s performance, and we apply a metal sputtered back contact. In the assembly and test stage, we apply busbars, inter(cid:12) layer material, and a rear glass cover sheet that is laminated to encapsulate the device. We then apply anti(cid:12)reflective coating material to the substrate glass to further improve the module(cid:89)s performance by increasing its ability to absorb sunlight. Finally, (cid:61)unction boxes, termination wires, and an under(cid:12)mount frame are applied to complete the assembly. We maintain a robust quality and reliability assurance program that monitors critical process parameters and measures product performance to ensure that industry and more stringent internal standards are met. We also conduct acceptance testing for electrical leakage, visual quality, and power measurement on a solar simulator prior to preparing a module for shipment. The quality and reliability tests complement production surveillance with an 9 ongoing monitoring program, sub(cid:61)ecting production modules to accelerated life stress testing to help ensure ongoing conformance to requirements of the International Electrotechnical Commission and Underwriters Laboratories Inc. These programs help assure delivery of power and performance in the field with a high level of product quality and reliability. Research and (cid:18)e(cid:57)e(cid:47)opment Our R(cid:6)D model differentiates us from much of our competition due to its vertical integration, from advanced research to product development, manufacturing, and applications. We continue to devote substantial resources to our R(cid:6)D efforts, which generally focus on continually improving the wattage and energy yield of our solar modules. We also focus our R(cid:6)D activities on continuously improving module durability and manufacturing efficiencies, including throughput improvement, volume ramp, and material cost reduction. Based on publicly available information, we are one of the leaders in R(cid:6)D investment among P(cid:48) solar module manufacturers, maintaining a rate of innovation that enables rapid wattage gains and cost reductions. In the course of our R(cid:6)D activities, we explore various technologies in our efforts to sustain competitive differentiation in our modules. We primarily conduct our R(cid:6)D activities and qualify process and product improvements for full production at our Perrysburg, Ohio plant and then use a systematic process to propagate them to our other production lines. We believe that our systematic approach to technology change management provides continuous improvements and ensures uniform adoption across our production lines. In addition, our production lines are replicas or near replicas of each other and, as a result, a process or production improvement on one line can be rapidly and reliably deployed to other production lines. We regularly produce research cells in our laboratories, some of which are tested for performance and certified by independent labs, such as the National Renewable Energy Laboratory. Cell efficiency measures the proportion of light converted to electricity in a single solar cell at standard test conditions. Our research cells are produced using laboratory equipment and methods and are not intended to be representative of our manufacturing capability. Our module conversion efficiency has improved on average more than half a percent every year for the last ten years. We currently hold two world records for CdTe P(cid:48) cell efficiency, achieving an independently certified research cell efficiency of 22.1(cid:5) and an aperture area module efficiency of 19.0(cid:5). We believe that our record cells demonstrate a potential long(cid:12)term module efficiency entitlement of over 25(cid:5) that is achievable using our commercial(cid:12)scale manufacturing equipment. Customers During 2020, we sold the ma(cid:61)ority of our solar modules (not included in our systems pro(cid:61)ects) to integrators and operators of systems in the United States and France, and such third(cid:12)party module sales represented approximately (cid:21)4(cid:5) of our total net sales. During 2020, Longroad Energy, NextEra Energy, and Softbank each accounted for more than 10(cid:5) of our modules business net sales. We continue to focus on key geographic markets, particularly in areas with abundant solar resources and sizable electricity demand, and additional customer relationships to diversify our customer base. We also collaborate with providers of community solar solutions, which address the residential and small business sectors to provide a broad range of customers with access to competitively priced solar energy regardless of the suitability of their rooftops. Community solar utilizes relatively small ground(cid:12)mounted installations that provide clean energy to utilities, which then offer consumers the ability to buy into a specific community installation and benefit from the solar power generated by that resource. The demand for such offerings continues to build as states across the country are enacting community solar policies, and utilities are looking to diversify their energy generation portfolio in order to meet customer demand for affordable, clean energy. We also collaborate with providers of Community Choice Aggregation programs, which allow cities and counties to purchase power on behalf of residents and businesses to provide clean energy options at competitive prices. Our expertise in module technology and utility(cid:12)scale generation, 10 paired with community solar and/or Community Choice Aggregation, allows residential power consumers to (cid:87)go solar,(cid:88) including those who live in apartment buildings or whose home rooftops cannot accommodate solar panels. The wholesale commercial and industrial market also represents a promising opportunity for the widespread adoption of P(cid:48) solar technology as corporations undertake certain sustainability commitments. The demand for corporate renewables continues to accelerate, with corporations worldwide committing to the RE100 campaign, a collaborative, global initiative of influential businesses committed to 100(cid:5) renewable electricity. We believe we also have a competitive advantage in the commercial and industrial market due to many customers(cid:89) sensitivity to the sustainability, experience, bankability, and financial viability of their suppliers and geographically diverse operating locations. With our sustainability advantage, strong development expertise, financial strength, and global footprint, we are well positioned to meet these needs. Competition The solar energy and renewable energy sectors are highly competitive and continually evolving as participants in these sectors strive to distinguish themselves within their markets and compete within the larger electric power industry. We face intense competition for sales of solar modules, which has resulted in and may continue to result in reduced average selling prices and loss of market share. With respect to our modules business, our primary sources of competition are crystalline silicon solar module manufacturers. In addition, we expect to compete with future entrants into the P(cid:48) solar industry and existing market participants that offer new or differentiated technological solutions. For example, many crystalline silicon cell and wafer manufacturers have transitioned from lower efficiency Back Surface Field ((cid:87)BSF(cid:88)) multi(cid:12)crystalline cells (the legacy technology against which we have generally competed) to higher efficiency Passivated Emitter Rear Contact ((cid:87)PERC(cid:88)) mono(cid:12)crystalline cells at competitive cost structures. Additionally, while conventional solar modules, including the solar modules we produce, are monofacial, meaning their ability to produce energy is a function of direct and diffuse irradiance on their front side, certain manufacturers of mono(cid:12)crystalline PERC modules offer bifacial modules that also capture diffuse irradiance on the back side of a module. Within the larger electric power industry, we compete with companies that currently offer or are developing other renewable energy technologies (including wind, hydroelectric, geothermal, biomass, and tidal technologies), as well as traditional energy generation sources. Certain of our existing or future competitors may have direct or indirect access to sovereign capital, which could enable such competitors to operate at minimal or negative operating margins for sustained periods of time. Among P(cid:48) solar module manufacturers, the principal methods of competition include sales price per watt, wattage (through a larger form factor or an improved conversion efficiency), energy yield, reliability, warranty terms, and customer payment terms. Our results of operations could be adversely affected if competitors reduce module pricing to levels below their costs, bid aggressively low prices for module sale agreements, or are able to operate at minimal or negative operating margins for sustained periods of time. We believe the solar industry may from time to time experience periods of structural imbalance between supply and demand (i.e., where production capacity exceeds global demand), and that such periods will also put pressure on pricing, which could adversely affect our results of operations. For additional information, see Item 1A. (cid:87)Risk Factors (cid:85) Competition in solar markets globally and across the solar value chain is intense, and could remain that way for an extended period of time. An increased global supply of P(cid:48) modules has caused and may continue to cause structural imbalances in which global P(cid:48) module supply exceeds demand, which could have a material adverse effect on our business, financial condition, and results of operations.(cid:88) Ra(cid:58) (cid:26)ateria(cid:47)s Our CdTe module manufacturing process uses approximately 30 types of raw materials and components to construct a solar module. One critical raw material in our production process is CdTe. Other raw materials and components that are critical to our manufacturing process include front glass coated with transparent conductive oxide, other semiconductor materials, organics such as photo resist, tempered back glass, frames, packaging components such as interlayer, cord plate/cord plate cap, lead wire, and solar connectors. Before we use these materials and components 11 in our manufacturing process, a supplier must undergo rigorous qualification procedures, and we continually evaluate new suppliers as part of our cost reduction roadmaps. When possible, we attempt to use suppliers that can provide a raw material supply source that is near our manufacturing locations, reducing the cost and lead times for such materials. Several of our key raw materials and components are either single(cid:12)sourced or sourced from a limited number of suppliers. (cid:31)o(cid:47)ar (cid:26)odu(cid:47)e Co(cid:47)(cid:47)ection and Rec(cid:60)c(cid:47)ing We are committed to extended producer responsibility and take into account the environmental impact of our products over their entire life cycle. As part of such efforts, we previously established the solar industry(cid:89)s first global comprehensive module collection and recycling program. Our module recycling process is designed to maximize the recovery of materials, including the glass and encapsulated semiconductor material, for use in new modules or other products and enhances the sustainability profile of our modules. Approximately 90(cid:5) of each collected First Solar module can be recycled into materials for reuse. For certain legacy customer sales contracts that were covered under this program, which has since been discontinued, we agreed to pay the costs for the collection and recycling of qualifying solar modules, and the end users agreed to notify us, disassemble their solar power systems, package the solar modules for shipment, and revert ownership rights over the modules back to us at the end of the modules(cid:89) service lives. We currently have recycling facilities operating at each of our manufacturing facilities in the United States, Malaysia, and (cid:48)ietnam and at our former manufacturing facility location in Germany. The EU(cid:89)s Waste Electrical and Electronic Equipment ((cid:87)WEEE(cid:88)) Directive places the obligation of recycling (including collection, treatment, and environmentally sound disposal) of electrical and electronic equipment products upon producers and is applicable to all P(cid:48) solar modules in EU member states. For modules covered under our program that were previously sold into and installed in the EU, we continue to maintain a commitment to cover the estimated collection and recycling costs consistent with our historical program. Additionally, as a result of the transposition of the WEEE Directive by the EU member states, we have ad(cid:61)usted our recycling offerings, as required, in various EU member states to ensure compliance with specific EU member state WEEE regulations. (cid:31)o(cid:47)ar (cid:26)odu(cid:47)e (cid:35)arranties We provide a limited P(cid:48) solar module warranty covering defects in materials and workmanship under normal use and service conditions for up to 12 years. We also typically warrant that modules installed in accordance with agreed(cid:12)upon specifications will produce at least 9(cid:23)(cid:5) of their labeled power output rating during the first year, with the warranty coverage reducing by a degradation factor every year thereafter throughout the limited power output warranty period of up to 30 years. Among other things, our solar module warranty also covers the resulting power output loss from cell cracking. For additional information on our solar module warranty programs, refer to Item 1A. (cid:87)Risk Factors (cid:85) Problems with product quality or performance may cause us to incur significant and/or unexpected contractual damages and/or warranty and related expenses, damage our market reputation, and prevent us from maintaining or increasing our market share.(cid:88) Sy(cid:53)(cid:54)(cid:39)m(cid:53) (cid:14)u(cid:53)(cid:43)(cid:48)(cid:39)(cid:53)(cid:53) Pro(cid:45)ect (cid:18)e(cid:57)e(cid:47)opment Pro(cid:61)ect development activities generally include (i) selecting, securing, and maintaining the pro(cid:61)ect site(cid:26) (ii) obtaining the requisite interconnection and transmission studies(cid:26) (iii) executing an interconnection agreement(cid:26) (iv) obtaining environmental and land(cid:12)use permits(cid:26) and (v) entering into a power purchase agreement ((cid:87)PPA(cid:88)) with an off(cid:12)taker for the power to be generated by the pro(cid:61)ect. The sequence of such development activities varies by international location and, in certain locations, may begin by initially bidding for PPA or off(cid:12)take agreements. These activities culminate in receiving the right to construct and operate a P(cid:48) solar power system. 12 Depending on the market opportunity or geographic location, we may acquire pro(cid:61)ects in various stages of development or acquire pro(cid:61)ect companies from developers in order to complete the development process, construct a system incorporating our modules, and sell the system to a long(cid:12)term owner. We may also collaborate with local partners in connection with these pro(cid:61)ect development activities. Depending on the type of pro(cid:61)ect or geographic location, PPAs or feed(cid:12)in(cid:12)tariff ((cid:87)FiT(cid:88)) structures define the price and terms the utility or customer will pay for power produced from the pro(cid:61)ect. Depending primarily on the location, stage of development upon our acquisition of the pro(cid:61)ect, and/or other site attributes, the development cycle typically ranges from one to two years but may be as long as five years. We may be required to incur significant costs for preliminary engineering, permitting, legal, and other expenses before we can determine whether a pro(cid:61)ect is feasible, economically attractive, or capable of being built. If there is a delay in obtaining any required regulatory approvals, we may be forced to incur additional costs or impair our pro(cid:61)ect assets, and the termination rights of the off(cid:12)taker under the PPA may be triggered. Following an evaluation of the long(cid:12)term cost structure, competitiveness, and risk(cid:12)ad(cid:61)usted returns of our U.S. pro(cid:61)ect development business, we have determined it is in the best interest of our stockholders to pursue the sale of this business. On January 24, 2021, we entered into an agreement with OMERS for the sale of our U.S. pro(cid:61)ect development operations, which comprises the business of developing, contracting for the construction of, and selling utility(cid:12)scale P(cid:48) solar power systems. The transaction includes our approximately 10 GWAC utility(cid:12)scale solar pro(cid:61)ect pipeline, including the advanced(cid:12)stage Horizon, Madison, Ridgely, Rabbitbrush, and Oak Trail pro(cid:61)ects that are expected to commence construction in the next two years(cid:26) the 30 MWAC Barilla Solar pro(cid:61)ect, which is operational(cid:26) and certain other equipment. In addition, OMERS has agreed to certain module purchase commitments. The completion of the transaction is contingent on a number of closing conditions, including the receipt of regulatory approval from FERC, the expiration of the mandatory waiting period under U.S. antitrust laws, a review of the transaction by CFIUS, and other customary closing conditions. Assuming satisfaction of such closing conditions, we expect the sale to be completed in the first half of 2021. (cid:19)PC (cid:31)er(cid:57)ices EPC services generally include (i) engineering design and related services, (ii) BoS procurement, and (iii) construction contracting and management. In 2019, we transitioned from an internal EPC service model in the United States to an external model, in which we leverage the capabilities of third(cid:12)party EPC services in providing power plant solutions to our systems segment customers. The shift to an external EPC service model in the United States aligns with our typical model in international markets and is facilitated, in part, by our Series (cid:21) module technology and its improved BoS compatibility. For systems we constructed, we typically provided limited warranties for defects in engineering design, installation, and BoS part workmanship for a period of one to two years following the substantial completion of a system or a block within the system. For certain systems we constructed, we have also provided an energy performance test during the first or second year of a system(cid:89)s operation to demonstrate that the actual energy generation for the applicable year meets or exceeds the modeled energy expectation, after certain ad(cid:61)ustments, such as irradiance, weather, module degradation, soiling, curtailment, and other conditions that may affect a system(cid:89)s energy output but are unrelated to quality, design, or construction. (cid:28)(cid:2)(cid:26) (cid:31)er(cid:57)ices Our typical O(cid:6)M service arrangements involve the performance of standard activities associated with operating and maintaining a P(cid:48) solar power system. We perform such activities pursuant to the scope of services outlined in the underlying contract. These activities are considered necessary to optimize system performance and comply with PPAs, other agreements, and regulations. Although the scope of our services varies by contract and (cid:61)urisdiction, our O(cid:6)M service arrangements generally include 24/(cid:22) system monitoring, compliance with various pro(cid:61)ect agreements and/or regulatory agencies, energy forecasting, performance engineering analysis, regular performance reporting, turn(cid:12)key maintenance services including spare parts and corrective maintenance repair, warranty management, and environmental services. As part of our O(cid:6)M services, we also typically provide an effective availability guarantee, which stipulates that a system will be available to generate a certain percentage of total possible energy during a 13 specific period after ad(cid:61)usting for factors outside our control as the service provider, such as weather, curtailment, outages, force ma(cid:61)eure, and other conditions that may affect system availability. Following an evaluation of the long(cid:12)term cost structure, competitiveness, and risk(cid:12)ad(cid:61)usted returns of our O(cid:6)M services business, we received an offer to purchase certain portions of the business and determined it is in the best interest of our stockholders to pursue this transaction. As a result, in August 2020 we entered into an agreement with Clairvest for the sale of our North American O(cid:6)M operations. The completion of the transaction is contingent on a number of closing conditions, including the receipt of certain third(cid:12)party consents and other customary closing conditions. Assuming satisfaction of such closing conditions, we expect the sale to be completed in the first half of 2021. Customers Our systems customers consist of utilities, independent power producers, commercial and industrial companies, and other system owners, such as investors who are looking for long(cid:12)term investment vehicles that are expected to generate consistent returns. Such customers may purchase completed systems, which include our P(cid:48) solar modules, or any combination of development, EPC, and/or O(cid:6)M services. We also seek to provide innovative power plant solutions to facilitate the adoption and optimize the use of our technology. During 2020, the substantial ma(cid:61)ority of our systems business sales were in the United States and Japan, and the principal customers of our systems business were Goldman Sachs Renewable Power, SMFL Mirai Partners, and Mitsui (cid:6) Co., who each accounted for more than 10(cid:5) of our systems business net sales. Competition With respect to our systems business, we face competition from other providers of renewable energy solutions, including developers of P(cid:48) solar power systems and developers of other forms of renewable energy pro(cid:61)ects, such as wind, hydroelectric, geothermal, biomass, and tidal pro(cid:61)ects. We may also compete with other developers that integrate energy storage solutions with P(cid:48) solar or wind pro(cid:61)ects, thereby enabling system owners to better align the delivery of energy with periods of peak demand. To the extent other solar module manufacturers become more vertically integrated, we expect to face increased competition from such companies as well. Certain current or potential future competitors may have a low cost of capital and/or access to sovereign capital. The decline in module prices over the last several years has increased interest in solar energy worldwide, and there are limited barriers to entry in certain parts of the P(cid:48) solar value chain, depending on the geographic market. Accordingly, competition at the system level can be intense, thereby exerting downward pressure on system(cid:12)level selling prices industry(cid:12)wide. See Item 1A. (cid:87)Risk Factors (cid:85) Competition at the system level can be intense, thereby potentially exerting downward pressure on system(cid:12)level profit margins industry(cid:12)wide, which could reduce our profitability and adversely affect our results of operations.(cid:88) (cid:28)(cid:58)n and (cid:28)perate From time to time, we may temporarily own and operate, or retain interests in, certain of our systems for a period of time based on strategic opportunities or market factors. The ability to do so provides certain potential benefits, including greater control over the sales process and offering a lower risk profile to pro(cid:61)ect buyers. As of December 31, 2020, we owned and operated a number of systems in various geographic markets, including Chile, India, the United States, and the Asia(cid:12)Pacific region. For more information about the economics of such ownership and the impacts on our liquidity see Item (cid:22). (cid:87)Management(cid:89)s Discussion and Analysis of Financial Condition and Results of Operations (cid:85) Liquidity and Capital Resources.(cid:88) 14 Intelle(cid:50)tual (cid:38)r(cid:62)(cid:63)ert(cid:72) Our success depends, in part, on our ability to maintain and protect our proprietary technology and to conduct our business without infringing on the proprietary rights of others. We rely primarily on a combination of patents, trademarks, and trade secrets, as well as associate and third(cid:12)party confidentiality agreements, to safeguard our intellectual property. We regularly file patent applications to protect inventions arising from our R(cid:6)D activities and are currently pursuing patent applications in the United States and other countries. Our patent applications and any future patent applications may not result in a patent being issued with the scope of the claims we seek, or at all, and any patents we may receive may be challenged, invalidated, or declared unenforceable. In addition, we have registered and/or have applied to register trademarks and service marks in the United States and a number of foreign countries for (cid:87)First Solar.(cid:88) With respect to proprietary know(cid:12)how that is not patentable and processes for which patents are difficult to enforce, we rely on, among other things, trade secret protection and confidentiality agreements to safeguard our interests. We believe that many elements of our P(cid:48) solar module manufacturing processes, including our unique materials sourcing, involve proprietary know(cid:12)how, technology, or data that are not covered by patents or patent applications, including technical processes, equipment designs, algorithms, and procedures. We have taken security measures to protect these elements. Our R(cid:6)D personnel have entered into confidentiality and proprietary information agreements with us. These agreements address intellectual property protection issues and require our associates to assign to us all of the inventions, designs, and technologies they develop during the course of their employment with us. We also require our customers and business partners to enter into confidentiality agreements before we disclose sensitive aspects of our modules, technology, or business plans. We have not been sub(cid:61)ect to any material intellectual property infringement or misappropriation claims. Regulat(cid:62)r(cid:72), En(cid:69)ir(cid:62)n(cid:60)ental, (cid:30)ealt(cid:55), an(cid:51) Sa(cid:53)et(cid:72) (cid:35)atter(cid:66) We are sub(cid:61)ect to various federal, state, local, and international laws and regulations relating to modules, systems, and services, and are often sub(cid:61)ect to oversight and regulation in accordance with national and local ordinances relating to building codes, safety, environmental protection, land acquisition, utility interconnection and metering, and other matters. Our systems business is also sub(cid:61)ect to regulatory oversight and liability if we fail to operate our P(cid:48) solar power systems in compliance with electric reliability rules. The impact of these laws and requirements may increase our overall costs and may delay, prevent, or increase the cost of manufacturing P(cid:48) modules or the construction and operation of the systems we intend to build. As we operate in the U.S. and internationally, we are also sub(cid:61)ect to the application of U.S. trade laws and trade laws of other countries. Such tariffs and policies, or any other U.S. or global trade remedies or other trade barriers that apply to us given our global operations, may directly or indirectly affect our business, financial condition, and results of operations. See Item 1A. (cid:87)Risk Factors (cid:85) Existing regulations and policies, changes thereto, and new regulations and policies may present technical, regulatory, and economic barriers to the purchase and use of P(cid:48) solar products or systems, which may significantly reduce demand for our modules, systems, or services.(cid:88) We are also sub(cid:61)ect to the application of various anti(cid:12)bribery laws, some of which prohibit improper payments to government and non(cid:12)government persons and entities, and others (e.g., the U.S. Foreign Corrupt Practices Act (the (cid:87)FCPA(cid:88)) and the U.K. Bribery Act) that extend their application to activities outside their country of origin. We compete against companies for contracts in China, India, South America, and the Middle East, which require substantial government contact and where norms can differ from U.S. standards, and not all competitors are sub(cid:61)ect to compliance with the same anti(cid:12)bribery laws. See Item 1A. (cid:87)Risk Factors (cid:85) We could be adversely affected by any violations of the FCPA, the U.K. Bribery Act, and other foreign anti(cid:12)bribery laws.(cid:88) We are also sub(cid:61)ect to various federal, state, local, and international laws and regulations relating to the protection of the environment, including those governing the discharge of pollutants into the air and water(cid:26) the use, management, and disposal of hazardous materials and wastes(cid:26) occupational health and safety(cid:26) and the cleanup of contaminated sites. Our operations include the use, handling, storage, transportation, generation, and disposal of hazardous 15 materials and wastes. Therefore, we could incur substantial costs, including cleanup costs, fines, and civil or criminal sanctions and costs arising from third(cid:12)party property damage or personal in(cid:61)ury claims as a result of violations of, or liabilities under, environmental and occupational health and safety laws and regulations or non(cid:12) compliance with environmental permits required for our operations. We believe we are currently in substantial compliance with applicable environmental and occupational health and safety requirements and do not expect to incur material expenditures for environmental and occupational health and safety controls in the foreseeable future. However, future developments such as the implementation of new, more stringent laws and regulations, more aggressive enforcement policies, or the discovery of unknown environmental conditions may require expenditures that could have a material adverse effect on our business, financial condition, or results of operations. See Item 1A. (cid:87)Risk Factors (cid:85) Environmental obligations and liabilities could have a substantial negative impact on our business, financial condition, and results of operations.(cid:88) C(cid:62)r(cid:63)(cid:62)rate (cid:30)i(cid:66)t(cid:62)r(cid:72) We were incorporated in Delaware in February 200(cid:21) and completed our initial public offering of common stock in November 200(cid:21). (cid:30)u(cid:60)an Ca(cid:63)ital As of December 31, 2020, we had approximately 5,100 associates (our term for full and part(cid:12)time employees), including approximately 4,000 in our modules business and approximately 400 associates that work directly in our systems business. The ma(cid:61)ority of these associates work in the United States, Malaysia, and (cid:48)ietnam. The remainder of our associates are in R(cid:6)D, sales and marketing, and general and administrative positions. As of December 31, 2020, we had approximately 300 associates that support our North American O(cid:6)M operations and U.S. pro(cid:61)ect development, collectively. These associates will depart the Company in con(cid:61)unction with the timing of sale agreements described above in (cid:87)Business Strategy.(cid:88) In response to the CO(cid:48)ID(cid:12)19 pandemic, we implemented safety protocols and new procedures to protect our associates and our customers. In line with guidance from the World Health Organization, local health authorities and other governmental authorities, we have implemented numerous preventative hygiene and safety measures at our global manufacturing, administrative, and other sites and facilities. The vast ma(cid:61)ority of our associates who are capable of performing their function remotely are telecommuting (i.e., working from home). None of our associates are currently represented by labor unions or covered by a collective bargaining agreement. As we continue to expand domestically and internationally, we may encounter either regional laws that mandate union representation or associates who desire union representation or a collective bargaining agreement. We recognize that in the locations where we operate, employees have the right to freely associate or not associate with third(cid:12)party labor organizations, along with the right to bargain or not to bargain collectively in accordance with local laws. 1(cid:21) A(cid:69)aila(cid:49)le In(cid:53)(cid:62)r(cid:60)ati(cid:62)n We maintain a website at www.firstsolar.com. We make available free of charge on our website our annual reports on Form 10(cid:12)K, quarterly reports on Form 10(cid:12)(cid:43), current reports on Form (cid:23)(cid:12)K, proxy statements, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the SEC. The information contained in or connected to our website is not incorporated by reference into this report. We use our website as one means of disclosing material non(cid:12)public information and for complying with our disclosure obligations under the SEC(cid:89)s Regulation FD. Such disclosures are typically included within the Investor Relations section of our website at investor.firstsolar.com. Accordingly, investors should monitor such portions of our website in addition to following our press releases, SEC filings, and public conference calls and webcasts. The SEC also maintains a website at www.sec.gov that contains reports and other information regarding issuers, such as First Solar, that file electronically with the SEC. In(cid:53)(cid:62)r(cid:60)ati(cid:62)n a(cid:49)(cid:62)ut Our E(cid:71)e(cid:50)uti(cid:69)e O(cid:53)(cid:53)i(cid:50)er(cid:66) Our executive officers and their ages and positions as of February 25, 2021 were as follows: Na(cid:60)e Mark R. Widmar . . . . . . . . . . . . . . . . . . Alexander R. Bradley . . . . . . . . . . . . . . Georges Antoun . . . . . . . . . . . . . . . . . . . Philip Tymen deJong . . . . . . . . . . . . . . . Michael Koralewski . . . . . . . . . . . . . . . Kuntal Kumar (cid:48)erma . . . . . . . . . . . . . . Patrick Buehler . . . . . . . . . . . . . . . . . . . Markus Gloeckler . . . . . . . . . . . . . . . . . Jason Dymbort . . . . . . . . . . . . . . . . . . . . Caroline Stockdale . . . . . . . . . . . . . . . . Age 55 39 5(cid:23) (cid:21)1 49 4(cid:23) 43 4(cid:22) 43 5(cid:22) (cid:38)(cid:62)(cid:66)iti(cid:62)n Chief Executive Officer Chief Financial Officer Chief Commercial Officer Chief Operations Officer Chief Manufacturing Operations Officer Chief Manufacturing Engineering Officer Chief (cid:43)uality and Reliability Officer Chief Technology Officer General Counsel and Secretary Chief People and Communications Officer Mark R. Widmar was appointed Chief Executive Officer in July 201(cid:21). He (cid:61)oined First Solar in April 2011 as Chief Financial Officer and also served as First Solar(cid:89)s Chief Accounting Officer from February 2012 through June 2015. From March 2015 to June 201(cid:21), Mr. Widmar served as the Chief Financial Officer and through June 201(cid:23), served as a director on the board of the general partner of (cid:23)point3 Energy Partners LP ((cid:87)(cid:23)point3(cid:88)), the (cid:61)oint yieldco formed by First Solar and SunPower Corporation in 2015 to own and operate a portfolio of selected solar generation assets. Prior to (cid:61)oining First Solar, Mr. Widmar served as Chief Financial Officer of GrafTech International Ltd., a leading global manufacturer of advanced carbon and graphite materials, from May 200(cid:21) through March 2011. Prior to (cid:61)oining GrafTech, Mr. Widmar served as Corporate Controller of NCR Inc. from 2005 to 200(cid:21), and was a Business Unit Chief Financial Officer for NCR from November 2002 to his appointment as Controller. He also served as a Division Controller at Dell, Inc. from August 2000 to November 2002. Mr. Widmar also held various financial and managerial positions with Lucent Technologies Inc., Allied Signal, Inc., and Bristol Myers/Squibb, Inc. He began his career in 19(cid:23)(cid:22) as an accountant with Ernst (cid:6) Young. Mr. Widmar holds a Bachelor of Science in business accounting and a Masters of Business Administration from Indiana University. Alexander R. Bradley was appointed Chief Financial Officer in October 201(cid:21). He (cid:61)oined First Solar in May 200(cid:23), and previously served as (cid:48)ice President of both Treasury and Pro(cid:61)ect Finance, leading or supporting the structuring, sale, and financing of over (cid:4)10 billion and approximately 2.(cid:22) GWDC of the Company(cid:89)s worldwide development assets, including several of the largest P(cid:48) power plant pro(cid:61)ects in North America. From June 201(cid:21) to June 201(cid:23), Mr. Bradley also served as an officer and board member of the general partner of (cid:23)point3. Prior to (cid:61)oining First Solar, Mr. Bradley worked at HSBC in investment banking and leveraged finance, in London and New York, covering the energy and utilities sector. He received his Master of Arts from the University of Edinburgh, Scotland. 1(cid:22) Georges Antoun was appointed Chief Commercial Officer in July 201(cid:21). He (cid:61)oined First Solar in July 2012 as Chief Operating Officer before being appointed as President, U.S. in July 2015. Mr. Antoun has over 30 years of operational and technical experience, including leadership positions at several global technology companies. Prior to (cid:61)oining First Solar, Mr. Antoun served as (cid:48)enture Partner at Technology Crossover (cid:48)entures ((cid:87)TC(cid:48)(cid:88)), a private equity and venture firm that he (cid:61)oined in July 2011. Before (cid:61)oining TC(cid:48), Mr. Antoun was the Head of Product Area IP (cid:6) Broadband Networks for Ericsson, based in San Jose, California. Mr. Antoun (cid:61)oined Ericsson in 200(cid:22), when Ericsson acquired Redback Networks, a telecommunications equipment company, where Mr. Antoun served as the Senior (cid:48)ice President of World Wide Sales (cid:6) Operations. After the acquisition, Mr. Antoun was promoted to Chief Executive Officer of the Redback Networks subsidiary. Prior to Redback Networks, Mr. Antoun spent five years at Cisco Systems, where he served as (cid:48)ice President of Worldwide Systems Engineering and Field Marketing, (cid:48)ice President of Worldwide Optical Operations, and (cid:48)ice President of Carrier Sales. Prior to Cisco Systems, he was the Director of Systems Engineering at Newbridge Networks, a data and voice networking company. Mr. Antoun started his career at Nynex (now (cid:48)erizon Communications), where he was part of its Science and Technology Division. Mr. Antoun also served as a member of the board of directors of Ruckus Wireless, Inc. and (cid:48)iolin Memory, Inc., both publicly(cid:12)traded companies. He earned a Bachelor of Science degree in engineering from the University of Louisiana at Lafayette and a Master(cid:89)s degree in information systems engineering from NYU Poly. Philip Tymen deJong was appointed Chief Operating Officer in July 2015. Mr. deJong plans to retire as Chief Operating Officer, effective April 2021, and currently has responsibility for overseeing priority pro(cid:61)ects for the Company. Mr. deJong is transitioning responsibility for manufacturing, EPC services, O(cid:6)M services, quality and reliability, supply chain, and information technology to Michael Koralewski, Chief Manufacturing Operations Officer(cid:26) Kuntal Kumar (cid:48)erma, Chief Manufacturing Engineering Officer(cid:26) and Patrick Buehler, Chief (cid:43)uality and Reliability Officer. Mr. deJong (cid:61)oined First Solar in January 2010 as (cid:48)ice President, Plant Management and served in several Senior (cid:48)ice President roles in manufacturing and operations prior to being appointed Senior (cid:48)ice President, Manufacturing (cid:6) EPC in January 2015. Prior to (cid:61)oining First Solar, Mr. deJong was (cid:48)ice President of Assembly/Test Manufacturing for Numonyx Corporation. Prior to that, he worked for 25 years at Intel Corporation, holding various positions in engineering, manufacturing, wafer fabrication management, and assembly/test manufacturing. Mr. deJong holds a Bachelor of Science degree in industrial engineering/mechanical engineering from Oregon State University and has completed advanced study at the University of New Mexico Anderson School of Management. Michael Koralewski was appointed Chief Manufacturing Operations Officer in July 2020. Mr. Koralewski provides nearly 25 years of global operational experience to the executive leadership team. Mr. Koralewski (cid:61)oined First Solar in 200(cid:21), serving in several senior roles in operations and quality management, including Senior (cid:48)ice President, Global Manufacturing since 2015(cid:26) (cid:48)ice President, Global Site Operations and Plant Manager since 2011(cid:26) and (cid:48)ice President, Global (cid:43)uality since 2009. In all of these roles Mr. Koralewski has been significantly involved since the beginning of First Solar(cid:89)s manufacturing scaling and expansion from site selection through sustaining operations. Prior to (cid:61)oining First Solar, Mr. Koralewski worked at Dana Incorporated where he held several positions with global responsibility in operations and quality management. He earned a Bachelor of Science in chemical engineering from Case Western Reserve University and a Master of Business Administration from Bowling Green State University. Kuntal Kumar (cid:48)erma was appointed Chief Manufacturing Engineering Officer in July 2020. Mr. (cid:48)erma (cid:61)oined First Solar in 2002, serving in progressively more senior roles in engineering and manufacturing, including (cid:48)ice President, Global Manufacturing Engineering since 2012. He is responsible for the global manufacturing performance and improvement roadmap, including global technology transfer, new plant start(cid:12)ups and strategic initiatives. Prior to (cid:61)oining First Solar, Mr. (cid:48)erma held several engineering and operations positions at Reliance Industries Limited, India. He is a Master Black Belt in Six Sigma/Lean Manufacturing with an expert certification in Taguchi Methods (Robust Engineering) and a Certification in Production and Inventory Management from American Production and Inventory Control Society. He earned a Bachelor of Science in mechanical engineering from the National Institute of Technology in India, a Master of Science in industrial engineering from the University of Toledo, and a Master of Business Administration from Bowling Green State University. 1(cid:23) Patrick Buehler was appointed Chief (cid:43)uality and Reliability Officer in July 2020. Mr. Buehler (cid:61)oined First Solar in 200(cid:21), serving in progressively more senior technical and operations roles in quality and reliability, including (cid:48)ice President, (cid:43)uality and Reliability since 2019. Prior to (cid:61)oining First Solar, Mr. Buehler held several roles in manufacturing, engineering, maintenance, and product development at DuPont de Nemours, Inc. and Cummins, Inc. He earned a Bachelor of Science in mechanical engineering from the University of Cincinnati and a Master of Science in mechanical engineering from Purdue University. Markus Gloeckler was appointed Chief Technology Officer in November 2020 after being appointed Co(cid:12)Chief Technology Officer in July 2020. He is focused on driving First Solar(cid:89)s Series (cid:21) thin film P(cid:48) module platform. Mr. Gloeckler has extensive experience guiding strategic research and development activities and has served First Solar as (cid:48)ice President and Chief Scientist, before being promoted to Senior (cid:48)ice President, Module Research and Development. He was instrumental in enabling First Solar(cid:89)s achievement of various world records relating to conversion efficiency for CdTe solar cells. In his role as (cid:48)ice President of Research, he led the thin film technology transfer from General Electric to First Solar following the intellectual property acquisition in 2013. He (cid:61)oined First Solar in 2005 in an engineering function supporting First Solar(cid:89)s technology development after the initial launch of the Series 2 module. Mr. Gloeckler holds an undergraduate degree in microsystems engineering from the Regensburg University of Applied Sciences in Germany, and a Doctor of Philosophy in physics from Colorado State University. Jason Dymbort (cid:61)oined First Solar in March 200(cid:23), serving in a broad range of legal roles before being appointed General Counsel and Secretary in July 2020. Between 2015 and 201(cid:23), Mr. Dymbort served as General Counsel and Secretary for the general partner of (cid:23)point3 Energy Partners, then a publicly(cid:12)traded yieldco and affiliate of First Solar. Before (cid:61)oining First Solar, Mr. Dymbort was a corporate attorney at Cravath, Swaine (cid:6) Moore LLP. He holds a Juris Doctor degree from the University of Pennsylvania Law School, where he was a member of the Penn Law Review, and a bachelor(cid:89)s degree from Brandeis University. Caroline Stockdale (cid:61)oined First Solar in October 2019 as Executive (cid:48)ice President, Human Resources and Communications and was appointed Chief People and Communications Officer in October 2020. Prior to (cid:61)oining First Solar, she served as the Chief Executive Officer for First Perform, a provider of human resources services for a variety of customers, from Fortune 100 companies to cyber start(cid:12)ups. Previously, she served as Chief Human Resources Officer for Medtronic from 2010 to 2013 and Warner Music Group from 2005 to 2009. Before (cid:61)oining Warner Music Group, she served as the senior human resources leader in global divisions of American Express from 2002 to 2005 and General Electric from 199(cid:22) to 2002. Ms. Stockdale is a member of the Forbes Human Resources Council. Ms. Stockdale holds a Bachelor of Arts in political theories and institutions, and philosophy, from the University of Sheffield, England. 19 Ite(cid:60) (cid:12)A. (cid:29)(cid:43)(cid:53)(cid:45) Fa(cid:37)(cid:54)or(cid:53) An investment in our stock involves a high degree of risk. You should carefully consider the following information, together with the other information in this Annual Report on Form 10(cid:12)K, before buying shares of our stock. If any of the following risks or uncertainties occur, our business, financial condition, and results of operations could be materially and adversely affected and the trading price of our stock could decline. Su(cid:60)(cid:60)ar(cid:72) (cid:62)(cid:53) Ri(cid:66)(cid:58) Fa(cid:50)t(cid:62)r(cid:66) The following is a summary of the principal risks and uncertainties that could materially adversely affect our business, financial condition, and results of operations and make an investment in our stock speculative or risky. You should read this summary together with the more detailed description of each risk factor contained below. Risks Re(cid:47)ated to (cid:28)ur (cid:26)arkets and Customers (cid:82) (cid:82) (cid:82) (cid:82) Competition in solar markets globally and across the solar value chain is intense, and could remain that way for an extended period of time. An increased global supply of P(cid:48) modules has caused and may continue to cause structural imbalances in which global P(cid:48) module supply exceeds demand. If our competitors reduce module pricing to levels near or below their manufacturing costs, or are able to operate at minimal or negative operating margins for sustained periods of time, or if demand for P(cid:48) modules does not grow sufficiently to (cid:61)ustify the current production supply, our business, financial condition, and results of operations could be adversely affected. P(cid:48) solar and related technologies may not be suitable for continued adoption at economically attractive rates of return. Sufficient additional demand for solar modules, related technologies, and systems may not develop or may take longer to develop than we anticipate, causing our net sales and profit to flatten or decline and threatening our ability to sustain profitability. The reduction, elimination, or expiration of government subsidies, economic incentives, tax incentives, renewable energy targets, and other support for on(cid:12)grid solar electricity applications, or other public policies could negatively impact demand and/or price levels for our solar modules and systems. The imposition of tariffs on our products could materially increase our costs to perform under our contracts with customers, which could adversely affect our results of operations. An increase in interest rates or tightening of the supply of capital in the global financial markets (including a reduction in total tax equity availability) could make it difficult for customers to finance the cost of a P(cid:48) solar power system and could reduce the demand for our modules or systems and/or lead to a reduction in the average selling price for such offerings. Risks Re(cid:47)ated to (cid:28)ur (cid:28)perations(cid:5) (cid:26)anu(cid:41)acturing(cid:5) and (cid:32)echno(cid:47)og(cid:60) (cid:82) We face intense competition from manufacturers of crystalline silicon solar modules(cid:26) if global supply exceeds global demand, it could lead to a further reduction in the average selling price for P(cid:48) solar modules, which could reduce our net sales and adversely affect our results of operations. (cid:82) (cid:82) Problems with product quality or performance may cause us to incur significant and/or unexpected contractual damages and/or warranty and related expenses, damage our market reputation, and prevent us from maintaining or increasing our market share. Our failure to further refine our technology, reduce module manufacturing and BoS costs, and develop and introduce improved P(cid:48) products could render our solar modules or systems uncompetitive and reduce our net sales, profitability, and/or market share. 20 (cid:82) Several of our key raw materials components, particularly CdTe, and manufacturing equipment are either single(cid:12)sourced or sourced from a limited number of suppliers, and their failure to perform could cause manufacturing delays and impair our ability to deliver solar modules to customers in the required quality and quantities and at a price that is profitable to us. Risks Re(cid:47)ated to (cid:28)ur (cid:31)(cid:60)stems (cid:16)usiness (cid:82) Pro(cid:61)ect development or construction activities may not be successful(cid:26) pro(cid:61)ects under development may not receive required permits, real property rights, PPAs, interconnection, and transmission arrangements(cid:26) or financing or construction may not commence or proceed as scheduled, which could increase our costs and impair our ability to recover our investments. (cid:82) We may be unable to acquire or lease land, obtain necessary interconnection and transmission rights, and/or obtain the approvals, licenses, permits, and electric transmission grid interconnection and transmission rights necessary to build and operate P(cid:48) solar power systems in a timely and cost effective manner, and regulatory agencies, local communities, labor unions, tribes, or other third parties may delay, prevent, or increase the cost of construction and operation of the system we intend to build. (cid:82) We may not be able to obtain long(cid:12)term contracts for the sale of power produced by our pro(cid:61)ects at prices and on other terms favorable to attract financing and other investments, adversely affecting our results of operations. (cid:82) Lack of transmission capacity availability, potential upgrade costs to the transmission grid, and other system constraints could significantly impact our ability to build P(cid:48) solar power systems and generate solar electricity power sales. Risks Re(cid:47)ated to Regu(cid:47)ations (cid:82) Existing regulations and policies, changes thereto, and new regulations and policies may present technical, regulatory, and economic barriers to the purchase and use of P(cid:48) solar products or systems, which may significantly reduce demand for our modules, systems, or services. Risks Re(cid:47)ated to the C(cid:28)(cid:34)(cid:23)(cid:18)(cid:6)(cid:10)(cid:14) Pandemic (cid:82) The extent to which the CO(cid:48)ID(cid:12)19 pandemic could impact us is highly uncertain and will depend largely on the severity and duration of the pandemic, measures taken to contain the spread of the virus, and policies implemented by governmental authorities to ease restrictions in a phased manner. Genera(cid:47) Risk (cid:20)actors (cid:82) (cid:82) If our long(cid:12)lived assets or pro(cid:61)ect related assets become impaired, we may be required to record significant charges to earnings. Our credit agreements contain covenant restrictions that may limit our ability to operate our business. 21 Ri(cid:66)(cid:58)(cid:66) Relate(cid:51) t(cid:62) Our (cid:35)ar(cid:58)et(cid:66) an(cid:51) Cu(cid:66)t(cid:62)(cid:60)er(cid:66) (cid:15)om(cid:50)(cid:39)(cid:54)(cid:43)(cid:54)(cid:43)o(cid:48) (cid:43)(cid:48) (cid:53)o(cid:46)ar mar(cid:45)(cid:39)(cid:54)(cid:53) (cid:41)(cid:46)o(cid:36)a(cid:46)(cid:46)y a(cid:48)(cid:38) a(cid:37)ro(cid:53)(cid:53) (cid:54)(cid:42)(cid:39) (cid:53)o(cid:46)ar (cid:56)a(cid:46)u(cid:39) (cid:37)(cid:42)a(cid:43)(cid:48) (cid:43)(cid:53) (cid:43)(cid:48)(cid:54)(cid:39)(cid:48)(cid:53)(cid:39)(cid:5) a(cid:48)(cid:38) (cid:37)ou(cid:46)(cid:38) r(cid:39)ma(cid:43)(cid:48) (cid:54)(cid:42)a(cid:54) (cid:57)ay (cid:40)or a(cid:48) (cid:39)(cid:58)(cid:54)(cid:39)(cid:48)(cid:38)(cid:39)(cid:38) (cid:50)(cid:39)r(cid:43)o(cid:38) o(cid:40) (cid:54)(cid:43)m(cid:39)(cid:7) (cid:13)(cid:48) (cid:43)(cid:48)(cid:37)r(cid:39)a(cid:53)(cid:39)(cid:38) (cid:41)(cid:46)o(cid:36)a(cid:46) (cid:53)u(cid:50)(cid:50)(cid:46)y o(cid:40) (cid:27)(cid:33) mo(cid:38)u(cid:46)(cid:39)(cid:53) (cid:42)a(cid:53) (cid:37)au(cid:53)(cid:39)(cid:38) a(cid:48)(cid:38) may (cid:37)o(cid:48)(cid:54)(cid:43)(cid:48)u(cid:39) (cid:54)o (cid:37)au(cid:53)(cid:39) (cid:53)(cid:54)ru(cid:37)(cid:54)ura(cid:46) (cid:43)m(cid:36)a(cid:46)a(cid:48)(cid:37)(cid:39)(cid:53) (cid:43)(cid:48) (cid:57)(cid:42)(cid:43)(cid:37)(cid:42) (cid:41)(cid:46)o(cid:36)a(cid:46) (cid:27)(cid:33) mo(cid:38)u(cid:46)(cid:39) (cid:53)u(cid:50)(cid:50)(cid:46)y (cid:39)(cid:58)(cid:37)(cid:39)(cid:39)(cid:38)(cid:53) (cid:38)(cid:39)ma(cid:48)(cid:38)(cid:5) (cid:57)(cid:42)(cid:43)(cid:37)(cid:42) (cid:37)ou(cid:46)(cid:38) (cid:42)a(cid:56)(cid:39) a ma(cid:54)(cid:39)r(cid:43)a(cid:46) a(cid:38)(cid:56)(cid:39)r(cid:53)(cid:39) (cid:39)(cid:40)(cid:40)(cid:39)(cid:37)(cid:54) o(cid:48) our (cid:36)u(cid:53)(cid:43)(cid:48)(cid:39)(cid:53)(cid:53)(cid:5) (cid:40)(cid:43)(cid:48)a(cid:48)(cid:37)(cid:43)a(cid:46) (cid:37)o(cid:48)(cid:38)(cid:43)(cid:54)(cid:43)o(cid:48)(cid:5) a(cid:48)(cid:38) r(cid:39)(cid:53)u(cid:46)(cid:54)(cid:53) o(cid:40) o(cid:50)(cid:39)ra(cid:54)(cid:43)o(cid:48)(cid:53)(cid:7) In the aggregate, we believe manufacturers of solar cells and modules have significant installed production capacity, relative to global demand, and the ability for additional capacity expansion. For example, we estimate that in 2020 approximately 50 GWDC of capacity was added by solar module manufacturers, primarily but not exclusively in Asia. We believe the solar industry may from time to time experience periods of structural imbalance between supply and demand (i.e., where production capacity exceeds global demand), and that such periods will continue to put pressure on pricing. During the past several years, industry average selling prices per watt have declined in many markets, at times significantly, both at the module and system levels, as competitors have reduced prices to sell inventories worldwide. There may be additional pressure on global demand and average selling prices in the future resulting from fluctuating demand in certain ma(cid:61)or solar markets, such as China. If our competitors reduce module pricing to levels near or below their manufacturing costs, or are able to operate at minimal or negative operating margins for sustained periods of time, or if demand for P(cid:48) modules does not grow sufficiently to (cid:61)ustify the current production supply, our business, financial condition, and results of operations could be adversely affected. (cid:20)(cid:40) (cid:27)(cid:33) (cid:53)o(cid:46)ar a(cid:48)(cid:38) r(cid:39)(cid:46)a(cid:54)(cid:39)(cid:38) (cid:54)(cid:39)(cid:37)(cid:42)(cid:48)o(cid:46)o(cid:41)(cid:43)(cid:39)(cid:53) ar(cid:39) (cid:48)o(cid:54) (cid:53)u(cid:43)(cid:54)a(cid:36)(cid:46)(cid:39) (cid:40)or (cid:37)o(cid:48)(cid:54)(cid:43)(cid:48)u(cid:39)(cid:38) a(cid:38)o(cid:50)(cid:54)(cid:43)o(cid:48) a(cid:54) (cid:39)(cid:37)o(cid:48)om(cid:43)(cid:37)a(cid:46)(cid:46)y a(cid:54)(cid:54)ra(cid:37)(cid:54)(cid:43)(cid:56)(cid:39) ra(cid:54)(cid:39)(cid:53) o(cid:40) r(cid:39)(cid:54)ur(cid:48) or (cid:43)(cid:40) (cid:53)u(cid:40)(cid:40)(cid:43)(cid:37)(cid:43)(cid:39)(cid:48)(cid:54) a(cid:38)(cid:38)(cid:43)(cid:54)(cid:43)o(cid:48)a(cid:46) (cid:38)(cid:39)ma(cid:48)(cid:38) (cid:40)or (cid:53)o(cid:46)ar mo(cid:38)u(cid:46)(cid:39)(cid:53)(cid:5) r(cid:39)(cid:46)a(cid:54)(cid:39)(cid:38) (cid:54)(cid:39)(cid:37)(cid:42)(cid:48)o(cid:46)o(cid:41)(cid:43)(cid:39)(cid:53)(cid:5) a(cid:48)(cid:38) (cid:53)y(cid:53)(cid:54)(cid:39)m(cid:53) (cid:38)o(cid:39)(cid:53) (cid:48)o(cid:54) (cid:38)(cid:39)(cid:56)(cid:39)(cid:46)o(cid:50) or (cid:54)a(cid:45)(cid:39)(cid:53) (cid:46)o(cid:48)(cid:41)(cid:39)r (cid:54)o (cid:38)(cid:39)(cid:56)(cid:39)(cid:46)o(cid:50) (cid:54)(cid:42)a(cid:48) (cid:57)(cid:39) a(cid:48)(cid:54)(cid:43)(cid:37)(cid:43)(cid:50)a(cid:54)(cid:39)(cid:5) our (cid:48)(cid:39)(cid:54) (cid:53)a(cid:46)(cid:39)(cid:53) a(cid:48)(cid:38) (cid:50)ro(cid:40)(cid:43)(cid:54) may (cid:40)(cid:46)a(cid:54)(cid:54)(cid:39)(cid:48) or (cid:38)(cid:39)(cid:37)(cid:46)(cid:43)(cid:48)(cid:39) a(cid:48)(cid:38) (cid:57)(cid:39) may (cid:36)(cid:39) u(cid:48)a(cid:36)(cid:46)(cid:39) (cid:54)o (cid:53)u(cid:53)(cid:54)a(cid:43)(cid:48) (cid:50)ro(cid:40)(cid:43)(cid:54)a(cid:36)(cid:43)(cid:46)(cid:43)(cid:54)y(cid:7) In comparison to traditional forms of energy generation, the solar energy market continues to be at a relatively early stage of development. If utility(cid:12)scale P(cid:48) solar technology proves unsuitable for continued adoption at economically attractive rates of return or if additional demand for solar modules and systems fails to develop sufficiently or takes longer to develop than we anticipate, we may be unable to grow our business or generate sufficient net sales to sustain profitability. In addition, demand for solar modules, related technologies, and systems in our targeted markets may develop to a lesser extent than we anticipate. Many factors may affect the viability of continued adoption of utility(cid:12)scale P(cid:48) solar technology in our targeted markets, as well as the demand for solar modules and systems generally, including the following: (cid:82) (cid:82) (cid:82) (cid:82) cost(cid:12)effectiveness of the electricity generated by P(cid:48) solar power systems compared to conventional energy sources, such as natural gas (which fuel source may be sub(cid:61)ect to significant price fluctuations from time to time), and other renewable energy sources, such as wind, geothermal, and hydroelectric(cid:26) changes in tax, trade remedies, and other public policy, as well as changes in economic, market, and other conditions that affect the price of, and demand for, conventional energy resources, non(cid:12)solar renewable energy resources (e.g., wind and hydroelectric), and energy efficiency programs and products, including increases or decreases in the prices of natural gas, coal, oil, and other fossil fuels and in the prices of competing renewable resources(cid:26) the extent of competition, barriers to entry, and overall conditions and timing related to the development of solar in new and emerging market segments such as commercial and industrial customers, community solar, community choice aggregators, and other customer segments(cid:26) availability, substance, and magnitude of support programs including federal, state, and local government subsidies, incentives, targets, and renewable portfolio standards, among other policies and programs, to accelerate the development of the solar industry(cid:26) 22 (cid:82) (cid:82) (cid:82) performance, reliability, and availability of energy generated by P(cid:48) solar power systems compared to conventional and other non(cid:12)solar renewable energy sources and products, particularly conventional energy generation capable of providing 24(cid:12)hour, non(cid:12)intermittent baseload power(cid:26) the development, functionality, scale, cost, and timing of energy storage solutions(cid:26) and changes in the amount and priorities of capital expenditures by end users of solar modules and systems (e.g., utilities), which capital expenditures tend to decrease when the economy slows or when interest rates increase, thereby resulting in redirection away from solar generation to development of competing forms of electric generation and to distribution (e.g., smart grid), transmission, and energy efficiency measures. (cid:31)(cid:42)(cid:39) r(cid:39)(cid:38)u(cid:37)(cid:54)(cid:43)o(cid:48)(cid:5) (cid:39)(cid:46)(cid:43)m(cid:43)(cid:48)a(cid:54)(cid:43)o(cid:48)(cid:5) or (cid:39)(cid:58)(cid:50)(cid:43)ra(cid:54)(cid:43)o(cid:48) o(cid:40) (cid:41)o(cid:56)(cid:39)r(cid:48)m(cid:39)(cid:48)(cid:54) (cid:53)u(cid:36)(cid:53)(cid:43)(cid:38)(cid:43)(cid:39)(cid:53)(cid:5) (cid:39)(cid:37)o(cid:48)om(cid:43)(cid:37) (cid:43)(cid:48)(cid:37)(cid:39)(cid:48)(cid:54)(cid:43)(cid:56)(cid:39)(cid:53)(cid:5) (cid:54)a(cid:58) (cid:43)(cid:48)(cid:37)(cid:39)(cid:48)(cid:54)(cid:43)(cid:56)(cid:39)(cid:53)(cid:5) r(cid:39)(cid:48)(cid:39)(cid:57)a(cid:36)(cid:46)(cid:39) (cid:39)(cid:48)(cid:39)r(cid:41)y (cid:54)ar(cid:41)(cid:39)(cid:54)(cid:53)(cid:5) a(cid:48)(cid:38) o(cid:54)(cid:42)(cid:39)r (cid:53)u(cid:50)(cid:50)or(cid:54) (cid:40)or o(cid:48)-(cid:41)r(cid:43)(cid:38) (cid:53)o(cid:46)ar (cid:39)(cid:46)(cid:39)(cid:37)(cid:54)r(cid:43)(cid:37)(cid:43)(cid:54)y a(cid:50)(cid:50)(cid:46)(cid:43)(cid:37)a(cid:54)(cid:43)o(cid:48)(cid:53)(cid:5) or o(cid:54)(cid:42)(cid:39)r (cid:50)u(cid:36)(cid:46)(cid:43)(cid:37) (cid:50)o(cid:46)(cid:43)(cid:37)(cid:43)(cid:39)(cid:53)(cid:5) (cid:53)u(cid:37)(cid:42) a(cid:53) (cid:54)ar(cid:43)(cid:40)(cid:40)(cid:53) or o(cid:54)(cid:42)(cid:39)r (cid:54)ra(cid:38)(cid:39) r(cid:39)m(cid:39)(cid:38)(cid:43)(cid:39)(cid:53) (cid:43)m(cid:50)o(cid:53)(cid:39)(cid:38) o(cid:48) (cid:53)o(cid:46)ar (cid:37)(cid:39)(cid:46)(cid:46)(cid:53) a(cid:48)(cid:38) mo(cid:38)u(cid:46)(cid:39)(cid:53)(cid:5) (cid:37)ou(cid:46)(cid:38) (cid:48)(cid:39)(cid:41)a(cid:54)(cid:43)(cid:56)(cid:39)(cid:46)y (cid:43)m(cid:50)a(cid:37)(cid:54) (cid:38)(cid:39)ma(cid:48)(cid:38) a(cid:48)(cid:38)(cid:8)or (cid:50)r(cid:43)(cid:37)(cid:39) (cid:46)(cid:39)(cid:56)(cid:39)(cid:46)(cid:53) (cid:40)or our (cid:53)o(cid:46)ar mo(cid:38)u(cid:46)(cid:39)(cid:53) a(cid:48)(cid:38) (cid:53)y(cid:53)(cid:54)(cid:39)m(cid:53) a(cid:48)(cid:38) (cid:46)(cid:43)m(cid:43)(cid:54) our (cid:41)ro(cid:57)(cid:54)(cid:42) or (cid:46)(cid:39)a(cid:38) (cid:54)o a r(cid:39)(cid:38)u(cid:37)(cid:54)(cid:43)o(cid:48) (cid:43)(cid:48) our (cid:48)(cid:39)(cid:54) (cid:53)a(cid:46)(cid:39)(cid:53) or (cid:43)(cid:48)(cid:37)r(cid:39)a(cid:53)(cid:39) our (cid:37)o(cid:53)(cid:54)(cid:53)(cid:5) (cid:54)(cid:42)(cid:39)r(cid:39)(cid:36)y a(cid:38)(cid:56)(cid:39)r(cid:53)(cid:39)(cid:46)y (cid:43)m(cid:50)a(cid:37)(cid:54)(cid:43)(cid:48)(cid:41) our o(cid:50)(cid:39)ra(cid:54)(cid:43)(cid:48)(cid:41) r(cid:39)(cid:53)u(cid:46)(cid:54)(cid:53)(cid:7) Although we believe that solar energy will experience widespread adoption in those applications where it competes economically with traditional forms of energy without any support programs, in certain markets our net sales and profits remain sub(cid:61)ect to variability based on the availability and size of government subsidies and economic incentives. Federal, state, and local governmental bodies in many countries have provided subsidies in the form of FiTs, rebates, tax incentives, and other incentives to end users, distributors, system integrators, and manufacturers of P(cid:48) solar products. Many of these support programs expire, phase out over time, require renewal by the applicable authority, or may be amended. A summary of certain recent developments in the ma(cid:61)or government support programs that may impact our business appears under Item 1. (cid:87)Business (cid:85) Support Programs.(cid:88) To the extent these support programs are reduced earlier than previously expected or are changed retroactively, such changes could negatively impact demand and/or price levels for our solar modules and systems, lead to a reduction in our net sales, and adversely impact our operating results. Another consideration in the U.S. market, and to a lesser extent in other global markets, is the effect of governmental land(cid:12)use planning policies and environmental policies on utility(cid:12)scale P(cid:48) solar development. The adoption of restrictive land(cid:12)use designations or environmental regulations that proscribe or restrict the siting of utility(cid:12)scale solar facilities could adversely affect the marginal cost of such development. Changes or threatened changes in U.S. regulatory policy may sub(cid:61)ect us to significant risks, including the following: (cid:82) (cid:82) (cid:82) a reduction or removal of clean energy programs and initiatives and the incentives they provide may diminish the market for future solar energy off(cid:12)take agreements, slow the retirement of aging fossil fuel plants, including the retirements of coal generation plants, and reduce the ability for solar pro(cid:61)ect developers to compete for off(cid:12)take agreements, which may reduce P(cid:48) solar module sales(cid:26) any limitations on the value or availability to potential investors of tax incentives that benefit solar energy pro(cid:61)ects such as the ITC and accelerated depreciation deductions could result in reducing such investors(cid:89) economic returns, causing a reduction in the availability of affordable financing, thereby reducing demand for P(cid:48) solar modules(cid:26) and any effort to overturn federal and state laws, regulations, or policies that are supportive of solar energy generation or that remove costs or other limitations on other types of electricity generation that compete with solar energy pro(cid:61)ects could negatively impact our ability to compete with traditional forms of electricity generation and materially and adversely affect our business. Application of U.S. trade laws, or trade laws of other countries, may also impact, either directly or indirectly, our operating results. In some instances, the application of trade laws is currently beneficial to the Company, and changes in their application could have an adverse impact. 23 For example, the United States currently imposes different types of tariffs and/or other trade remedies on certain imported crystalline silicon photovoltaic modules and cells from various countries. These tariffs include a global safeguard measure imposed pursuant to Section 201 of the Trade Act of 19(cid:22)4 that provides for tariffs on imported crystalline silicon solar modules and a tariff(cid:12)rate quota on imported crystalline silicon solar cells. Between February 2021 and February 2022, the tariff rate is 1(cid:23)(cid:5) for imported crystalline silicon photovoltaic modules and imported crystalline silicon solar cells above the tariff rate quota. Thin film solar cell products, such as our CdTe technology, are specifically excluded from the tariffs. The positive impact of this measure on our operating results was reduced by a tariff exclusion for imports of bifacial modules that the U.S. Trade Representative granted in June 2019 and that the U.S. President withdrew in October 2020. Further changes to the measure, including as a result of pending litigation challenging the withdrawal of the exclusion, could further impact our operating results. In addition, the United States currently imposes antidumping and countervailing duties on certain imported crystalline silicon photovoltaic cells and modules from China and Taiwan. Such antidumping and countervailing duties can change over time pursuant to annual reviews conducted by the U.S. Department of Commerce, and a decline in duty rates could have an adverse impact on our operating results. In other instances, the application of U.S. trade laws has had, or could have, an adverse impact on our operating results by increasing our costs or limiting the competitiveness of our products. Examples include tariffs the United States imposes on certain imported aluminum and steel articles, generally at rates of 10(cid:5) and 25(cid:5), respectively, under Section 232 of the Trade Expansion Act of 19(cid:21)2(cid:26) and potential tariffs on imports of goods from (cid:48)ietnam under Section 301 of the Tariff Act of 19(cid:22)4. If such tariffs are imposed on solar modules imported from (cid:48)ietnam, it could negatively affect our business, financial condition, and results of operations. Internationally, in July 201(cid:23), the Indian government imposed a safeguard measure on solar cells and modules imported from various countries, including member countries of the Organisation for Economic Co(cid:12)operation and Development ((cid:87)OECD(cid:88)), China, and Malaysia, for a two(cid:12)year period, starting at 25(cid:5) through July 2019 and declining by five percentage points in each subsequent six(cid:12)month period. In July 2020, the Indian government announced an extension to the safeguard duty regime at a revised rate of 14.9(cid:5) through December 2020 and declining to 14.5(cid:5) through July 2021. These duties are applicable to imports from member countries of the OECD, China, (cid:48)ietnam, and Thailand, but imports from Malaysia have been exempted from the revised safeguard measures. Such tariffs and policies, or any other U.S. or global trade remedies or other trade barriers, may directly or indirectly affect U.S. or global markets for solar energy and our business, financial condition, and results of operations. These examples show that established markets for P(cid:48) solar development face uncertainties arising from policy, regulatory, and governmental constraints. While the expected potential of the markets we are targeting is significant, policy promulgation and market development are especially vulnerable to governmental inertia, political instability, the imposition or lowering of trade remedies and other trade barriers, geopolitical risk, fossil fuel subsidization, potentially stringent localization requirements, and limited available infrastructure. (cid:13)(cid:48) (cid:43)(cid:48)(cid:37)r(cid:39)a(cid:53)(cid:39) (cid:43)(cid:48) (cid:43)(cid:48)(cid:54)(cid:39)r(cid:39)(cid:53)(cid:54) ra(cid:54)(cid:39)(cid:53) or (cid:54)(cid:43)(cid:41)(cid:42)(cid:54)(cid:39)(cid:48)(cid:43)(cid:48)(cid:41) o(cid:40) (cid:54)(cid:42)(cid:39) (cid:53)u(cid:50)(cid:50)(cid:46)y o(cid:40) (cid:37)a(cid:50)(cid:43)(cid:54)a(cid:46) (cid:43)(cid:48) (cid:54)(cid:42)(cid:39) (cid:41)(cid:46)o(cid:36)a(cid:46) (cid:40)(cid:43)(cid:48)a(cid:48)(cid:37)(cid:43)a(cid:46) mar(cid:45)(cid:39)(cid:54)(cid:53) (cid:3)(cid:43)(cid:48)(cid:37)(cid:46)u(cid:38)(cid:43)(cid:48)(cid:41) a r(cid:39)(cid:38)u(cid:37)(cid:54)(cid:43)o(cid:48) (cid:43)(cid:48) (cid:54)o(cid:54)a(cid:46) (cid:54)a(cid:58) (cid:39)(cid:51)u(cid:43)(cid:54)y a(cid:56)a(cid:43)(cid:46)a(cid:36)(cid:43)(cid:46)(cid:43)(cid:54)y(cid:4) (cid:37)ou(cid:46)(cid:38) ma(cid:45)(cid:39) (cid:43)(cid:54) (cid:38)(cid:43)(cid:40)(cid:40)(cid:43)(cid:37)u(cid:46)(cid:54) (cid:40)or (cid:37)u(cid:53)(cid:54)om(cid:39)r(cid:53) (cid:54)o (cid:40)(cid:43)(cid:48)a(cid:48)(cid:37)(cid:39) (cid:54)(cid:42)(cid:39) (cid:37)o(cid:53)(cid:54) o(cid:40) a (cid:27)(cid:33) (cid:53)o(cid:46)ar (cid:50)o(cid:57)(cid:39)r (cid:53)y(cid:53)(cid:54)(cid:39)m a(cid:48)(cid:38) (cid:37)ou(cid:46)(cid:38) r(cid:39)(cid:38)u(cid:37)(cid:39) (cid:54)(cid:42)(cid:39) (cid:38)(cid:39)ma(cid:48)(cid:38) (cid:40)or our mo(cid:38)u(cid:46)(cid:39)(cid:53) or (cid:53)y(cid:53)(cid:54)(cid:39)m(cid:53) a(cid:48)(cid:38)(cid:8)or (cid:46)(cid:39)a(cid:38) (cid:54)o a r(cid:39)(cid:38)u(cid:37)(cid:54)(cid:43)o(cid:48) (cid:43)(cid:48) (cid:54)(cid:42)(cid:39) a(cid:56)(cid:39)ra(cid:41)(cid:39) (cid:53)(cid:39)(cid:46)(cid:46)(cid:43)(cid:48)(cid:41) (cid:50)r(cid:43)(cid:37)(cid:39) (cid:40)or (cid:53)u(cid:37)(cid:42) o(cid:40)(cid:40)(cid:39)r(cid:43)(cid:48)(cid:41)(cid:53)(cid:7) Many of our customers and our systems business depend on debt and/or equity financing to fund the initial capital expenditure required to develop, build, and/or purchase a P(cid:48) solar power system. As a result, an increase in interest rates, or a reduction in the supply of pro(cid:61)ect debt financing or tax equity investments, could reduce the number of solar pro(cid:61)ects that receive financing or otherwise make it difficult for our customers or our systems business to secure the financing necessary to develop, build, purchase, or install a P(cid:48) solar power system on favorable terms, or at all, and thus lower demand for our solar modules, which could limit our growth or reduce our net sales. See the Risk Factor entitled (cid:87)The reduction, elimination, or expiration of government subsidies, economic incentives, tax incentives, renewable energy targets, and other support for on(cid:12)grid solar electricity applications, or other public 24 policies, such as tariffs or other trade remedies imposed on solar cells and modules, could negatively impact demand and/or price levels for our solar modules and systems and limit our growth or lead to a reduction in our net sales or increase our costs, thereby adversely impacting our operating results(cid:88) for additional information. In addition, we believe that a significant percentage of our customers install systems as an investment, funding the initial capital expenditure through a combination of equity and debt. An increase in interest rates could lower an investor(cid:89)s return on investment in a system, increase equity return requirements, or make alternative investments more attractive relative to P(cid:48) solar power systems and, in each case, could cause these customers to seek alternative investments. (cid:34)(cid:39) may (cid:36)(cid:39) u(cid:48)a(cid:36)(cid:46)(cid:39) (cid:54)o (cid:40)u(cid:46)(cid:46)y (cid:39)(cid:58)(cid:39)(cid:37)u(cid:54)(cid:39) o(cid:48) our (cid:46)o(cid:48)(cid:41)-(cid:54)(cid:39)rm (cid:53)(cid:54)ra(cid:54)(cid:39)(cid:41)(cid:43)(cid:37) (cid:50)(cid:46)a(cid:48)(cid:53)(cid:5) (cid:57)(cid:42)(cid:43)(cid:37)(cid:42) (cid:37)ou(cid:46)(cid:38) (cid:42)a(cid:56)(cid:39) a ma(cid:54)(cid:39)r(cid:43)a(cid:46) a(cid:38)(cid:56)(cid:39)r(cid:53)(cid:39) (cid:39)(cid:40)(cid:40)(cid:39)(cid:37)(cid:54) o(cid:48) our (cid:36)u(cid:53)(cid:43)(cid:48)(cid:39)(cid:53)(cid:53)(cid:5) (cid:40)(cid:43)(cid:48)a(cid:48)(cid:37)(cid:43)a(cid:46) (cid:37)o(cid:48)(cid:38)(cid:43)(cid:54)(cid:43)o(cid:48)(cid:5) or r(cid:39)(cid:53)u(cid:46)(cid:54)(cid:53) o(cid:40) o(cid:50)(cid:39)ra(cid:54)(cid:43)o(cid:48)(cid:53)(cid:7) We face numerous difficulties in executing on our long(cid:12)term strategic plans, particularly in new foreign (cid:61)urisdictions, including the following: (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) difficulty in competing against companies who may have greater financial resources and/or a more effective or established localized business presence and/or an ability to operate with minimal or negative operating margins for sustained periods of time(cid:26) difficulty in competing successfully with other technologies, such as bifacial modules and n(cid:12)type mono(cid:12) crystalline wafers and cells(cid:26) difficulty in accurately prioritizing geographic markets that we can most effectively and profitably serve with our P(cid:48) solar offerings, including miscalculations in overestimating or underestimating addressable market demand(cid:26) adverse public policies in countries we operate in and/or are pursuing, including local content requirements, the imposition of trade remedies, or capital investment requirements(cid:26) business climates, such as that in China, that may have the effect of putting foreign companies at a disadvantage relative to domestic companies(cid:26) unstable economic, social, and/or operating environments in foreign (cid:61)urisdictions, including social unrest, currency, inflation, and interest rate uncertainties(cid:26) the possibility of applying an ineffective commercial approach to targeted markets, including product offerings that may not meet market needs(cid:26) difficulty in generating sufficient sales volumes at economically sustainable profitability levels(cid:26) difficulty in timely identifying, attracting, training, and retaining qualified sales, technical, and other personnel in geographies targeted for expansion(cid:26) difficulty in maintaining proper controls and procedures as we expand our business operations in terms of geographical reach, including transitioning certain business functions to low(cid:12)cost geographies, with any material control failure potentially leading to reputational damage and loss of confidence in our financial reporting(cid:26) difficulty in competing successfully for market share in overall solar markets as a result of the success of companies participating in the global rooftop P(cid:48) solar market, which is a segment in which we do not have significant historical experience(cid:26) 25 (cid:82) (cid:82) (cid:82) (cid:82) difficulty in establishing and implementing a commercial and operational approach adequate to address the specific needs of the markets we are pursuing(cid:26) difficulty in identifying effective local partners and developing any necessary partnerships with local businesses on commercially acceptable terms(cid:26) difficulty in balancing market demand and manufacturing production in an efficient and timely manner, potentially causing our manufacturing capacity to be constrained in some future periods or over(cid:12)supplied in others(cid:26) and difficulty in obtaining the necessary regulatory approvals to consummate the sale of our U.S. pro(cid:61)ect development business. Refer also to the Risk Factors entitled (cid:87)Our substantial international operations sub(cid:61)ect us to a number of risks, including unfavorable political, regulatory, labor, and tax conditions in the United States and/or foreign countries,(cid:88) and (cid:87)The reduction, elimination, or expiration of government subsidies, economic incentives, tax incentives, renewable energy targets, and other support for on(cid:12)grid solar electricity applications, or other public policies, such as tariffs or other trade remedies imposed on solar cells and modules, could negatively impact demand and/or price levels for our solar modules and systems and limit our growth or lead to a reduction in our net sales or increase our costs, thereby adversely impacting our operating results.(cid:88) (cid:31)(cid:42)(cid:39) (cid:46)o(cid:53)(cid:53) o(cid:40) a(cid:48)y o(cid:40) our (cid:46)ar(cid:41)(cid:39) (cid:37)u(cid:53)(cid:54)om(cid:39)r(cid:53)(cid:5) or (cid:54)(cid:42)(cid:39) (cid:43)(cid:48)a(cid:36)(cid:43)(cid:46)(cid:43)(cid:54)y o(cid:40) our (cid:37)u(cid:53)(cid:54)om(cid:39)r(cid:53) a(cid:48)(cid:38) (cid:37)ou(cid:48)(cid:54)(cid:39)r(cid:50)ar(cid:54)(cid:43)(cid:39)(cid:53) (cid:54)o (cid:50)(cid:39)r(cid:40)orm u(cid:48)(cid:38)(cid:39)r (cid:54)(cid:42)(cid:39)(cid:43)r (cid:37)o(cid:48)(cid:54)ra(cid:37)(cid:54)(cid:53) (cid:57)(cid:43)(cid:54)(cid:42) u(cid:53)(cid:5) (cid:37)ou(cid:46)(cid:38) (cid:53)(cid:43)(cid:41)(cid:48)(cid:43)(cid:40)(cid:43)(cid:37)a(cid:48)(cid:54)(cid:46)y r(cid:39)(cid:38)u(cid:37)(cid:39) our (cid:48)(cid:39)(cid:54) (cid:53)a(cid:46)(cid:39)(cid:53) a(cid:48)(cid:38) (cid:48)(cid:39)(cid:41)a(cid:54)(cid:43)(cid:56)(cid:39)(cid:46)y (cid:43)m(cid:50)a(cid:37)(cid:54) our r(cid:39)(cid:53)u(cid:46)(cid:54)(cid:53) o(cid:40) o(cid:50)(cid:39)ra(cid:54)(cid:43)o(cid:48)(cid:53)(cid:7) Our customers include integrators and operators of systems, utilities, independent power producers, commercial and industrial companies, and other system owners, who may experience intense competition at the system level, thereby constraining the ability for such customers to sustain meaningful and consistent profitability. The loss of any of our large customers, their inability to perform under their contracts, or their default in payment could significantly reduce our net sales and/or adversely impact our operating results. While our contracts with customers typically have certain firm purchase commitments and may include provisions for the payment of amounts to us in certain events of contract termination, these contracts may be sub(cid:61)ect to amendments made by us or requested by our customers. These amendments may reduce the volume of modules to be sold under the contract, ad(cid:61)ust delivery schedules, or otherwise decrease the expected revenue under these contracts. Although we believe that we can mitigate this risk, in part, by reallocating modules to other customers if the need arises, we may be unable, in whole or in part, to do so on similar terms or at all. We may also mitigate this risk by requiring some form of payment security from our customers, such as parent guarantees, bank guarantees, surety bonds, or commercial letters of credit. However, in the event the providers of such payment security fail to perform their obligations, our operating results could be adversely impacted. (cid:34)(cid:39) may (cid:36)(cid:39) u(cid:48)a(cid:36)(cid:46)(cid:39) (cid:54)o (cid:50)ro(cid:40)(cid:43)(cid:54)a(cid:36)(cid:46)y (cid:50)ro(cid:56)(cid:43)(cid:38)(cid:39) (cid:48)(cid:39)(cid:57) (cid:53)o(cid:46)ar o(cid:40)(cid:40)(cid:39)r(cid:43)(cid:48)(cid:41)(cid:53) or a(cid:37)(cid:42)(cid:43)(cid:39)(cid:56)(cid:39) (cid:53)u(cid:40)(cid:40)(cid:43)(cid:37)(cid:43)(cid:39)(cid:48)(cid:54) mar(cid:45)(cid:39)(cid:54) (cid:50)(cid:39)(cid:48)(cid:39)(cid:54)ra(cid:54)(cid:43)o(cid:48) (cid:57)(cid:43)(cid:54)(cid:42) (cid:53)u(cid:37)(cid:42) o(cid:40)(cid:40)(cid:39)r(cid:43)(cid:48)(cid:41)(cid:53)(cid:7) We may expand our portfolio of offerings to include solutions that build upon our core competencies but for which we have not had significant historical experience, including variations in our traditional product offerings or other offerings related to commercial and industrial customers and community solar. We cannot be certain that we will be able to ascertain and allocate the appropriate financial and human resources necessary to grow these business areas. We could invest capital into growing these businesses but fail to address market or customer needs or otherwise not experience a satisfactory level of financial return. Also, in expanding into these areas, we may be competing against companies that previously have not been significant competitors, such as companies that currently have substantially more experience than we do in the residential, commercial and industrial, or other targeted offerings. If we are 2(cid:21) unable to achieve growth in these areas, our overall growth and financial performance may be limited relative to our competitors and our operating results could be adversely impacted. Ri(cid:66)(cid:58)(cid:66) Relate(cid:51) t(cid:62) Our O(cid:63)erati(cid:62)n(cid:66), (cid:35)anu(cid:53)a(cid:50)turing, an(cid:51) Te(cid:50)(cid:55)n(cid:62)l(cid:62)g(cid:72) (cid:34)(cid:39) (cid:40)a(cid:37)(cid:39) (cid:43)(cid:48)(cid:54)(cid:39)(cid:48)(cid:53)(cid:39) (cid:37)om(cid:50)(cid:39)(cid:54)(cid:43)(cid:54)(cid:43)o(cid:48) (cid:40)rom ma(cid:48)u(cid:40)a(cid:37)(cid:54)ur(cid:39)r(cid:53) o(cid:40) (cid:37)ry(cid:53)(cid:54)a(cid:46)(cid:46)(cid:43)(cid:48)(cid:39) (cid:53)(cid:43)(cid:46)(cid:43)(cid:37)o(cid:48) (cid:53)o(cid:46)ar mo(cid:38)u(cid:46)(cid:39)(cid:53)(cid:12) (cid:43)(cid:40) (cid:41)(cid:46)o(cid:36)a(cid:46) (cid:53)u(cid:50)(cid:50)(cid:46)y (cid:39)(cid:58)(cid:37)(cid:39)(cid:39)(cid:38)(cid:53) (cid:41)(cid:46)o(cid:36)a(cid:46) (cid:38)(cid:39)ma(cid:48)(cid:38)(cid:5) (cid:43)(cid:54) (cid:37)ou(cid:46)(cid:38) (cid:46)(cid:39)a(cid:38) (cid:54)o a (cid:40)ur(cid:54)(cid:42)(cid:39)r r(cid:39)(cid:38)u(cid:37)(cid:54)(cid:43)o(cid:48) (cid:43)(cid:48) (cid:54)(cid:42)(cid:39) a(cid:56)(cid:39)ra(cid:41)(cid:39) (cid:53)(cid:39)(cid:46)(cid:46)(cid:43)(cid:48)(cid:41) (cid:50)r(cid:43)(cid:37)(cid:39) (cid:40)or (cid:27)(cid:33) (cid:53)o(cid:46)ar mo(cid:38)u(cid:46)(cid:39)(cid:53), (cid:57)(cid:42)(cid:43)(cid:37)(cid:42) (cid:37)ou(cid:46)(cid:38) r(cid:39)(cid:38)u(cid:37)(cid:39) our (cid:48)(cid:39)(cid:54) (cid:53)a(cid:46)(cid:39)(cid:53) a(cid:48)(cid:38) a(cid:38)(cid:56)(cid:39)r(cid:53)(cid:39)(cid:46)y a(cid:40)(cid:40)(cid:39)(cid:37)(cid:54) our r(cid:39)(cid:53)u(cid:46)(cid:54)(cid:53) o(cid:40) o(cid:50)(cid:39)ra(cid:54)(cid:43)o(cid:48)(cid:53)(cid:7) The solar and renewable energy industries are highly competitive and are continually evolving as participants strive to distinguish themselves within their markets and compete with the larger electric power industry. Within the global P(cid:48) solar industry, we face intense competition from crystalline silicon solar module manufacturers. Existing or future solar module manufacturers might be acquired by larger companies with significant capital resources, thereby further intensifying competition with us. In addition, the introduction of a low cost disruptive technology could adversely affect our ability to compete, which could reduce our net sales and adversely affect our results of operations. Even if demand for solar modules continues to grow, the rapid manufacturing capacity expansion undertaken by many module manufacturers in China and certain parts of Southeast Asia, particularly manufacturers of crystalline silicon cells, modules, and wafers, has created and may continue to cause periods of structural imbalance in which supply exceeds demand. See the Risk Factor entitled (cid:87)Competition in solar markets globally and across the solar value chain is intense, and could remain that way for an extended period of time. An increased global supply of P(cid:48) modules has caused and may continue to cause structural imbalances in which global P(cid:48) module supply exceeds demand, which could have a material adverse effect on our business, financial condition, and results of operations,(cid:88) for additional information. In addition, we believe any significant decrease in the cost of silicon feedstock or polysilicon would reduce the manufacturing cost of crystalline silicon modules and lead to further pricing pressure for solar modules and potentially an oversupply of solar modules. We also believe many crystalline silicon cell and wafer manufacturers have substantially transitioned from lower efficiency BSF multi(cid:12)crystalline cells (the legacy technology against which we have generally competed in our markets) to higher efficiency PERC mono(cid:12)crystalline cells at competitive cost structures. As a result, we expect that in the near future, our primary competition will be mono(cid:12)crystalline PERC based modules with higher conversion efficiencies. Additionally, while conventional solar modules, including the solar modules we produce, are monofacial, meaning their ability to produce energy is a function of direct and diffuse irradiance on their front side, certain manufacturers of mono(cid:12)crystalline PERC solar modules offer bifacial modules that also capture diffuse irradiance on the back side of a module. Such technology can improve the overall energy production of a module relative to nameplate front(cid:12)side efficiency when applied in certain applications and BoS configurations, which could potentially lower the overall levelized cost of electricity ((cid:87)LCOE(cid:88)), meaning the net present value of a system(cid:89)s total life cycle costs divided by the quantity of energy that is expected to be produced over the system(cid:89)s life, of a system when compared to systems using conventional solar modules, including the modules we produce. Additionally, we believe that our competitors are evaluating the possibility of transitioning from p(cid:12)type to n(cid:12)type mono(cid:12)crystalline wafers and cells. If successful, such transition would further increase the efficiency and energy yield of their product. Finally, many of our competitors are promoting modules with larger overall area based on the use of larger silicon wafers. While the transition to such larger wafers would increase nameplate wattage, we believe the associated production cost would not improve significantly. During any such period, our competitors could decide to reduce their sales prices in response to competition, even below their manufacturing costs, in order to generate sales, and may do so for a sustained period. Other competitors may have direct or indirect access to sovereign capital, which could enable such competitors to operate at minimal or negative operating margins for sustained periods of time. As a result, we may be unable to sell our solar modules or systems at attractive prices, or for a profit, during any period of excess supply of solar modules, which would reduce our net sales and adversely affect our results of operations. Additionally, we may decide to lower our average selling 2(cid:22) prices to certain customers in certain markets in response to competition, which could also reduce our net sales and adversely affect our results of operations. (cid:27)ro(cid:36)(cid:46)(cid:39)m(cid:53) (cid:57)(cid:43)(cid:54)(cid:42) (cid:50)ro(cid:38)u(cid:37)(cid:54) (cid:51)ua(cid:46)(cid:43)(cid:54)y or (cid:50)(cid:39)r(cid:40)orma(cid:48)(cid:37)(cid:39) may (cid:37)au(cid:53)(cid:39) u(cid:53) (cid:54)o (cid:43)(cid:48)(cid:37)ur (cid:53)(cid:43)(cid:41)(cid:48)(cid:43)(cid:40)(cid:43)(cid:37)a(cid:48)(cid:54) a(cid:48)(cid:38)(cid:8)or u(cid:48)(cid:39)(cid:58)(cid:50)(cid:39)(cid:37)(cid:54)(cid:39)(cid:38) (cid:37)o(cid:48)(cid:54)ra(cid:37)(cid:54)ua(cid:46) (cid:38)ama(cid:41)(cid:39)(cid:53) a(cid:48)(cid:38)(cid:8)or (cid:57)arra(cid:48)(cid:54)y a(cid:48)(cid:38) r(cid:39)(cid:46)a(cid:54)(cid:39)(cid:38) (cid:39)(cid:58)(cid:50)(cid:39)(cid:48)(cid:53)(cid:39)(cid:53)(cid:5) (cid:38)ama(cid:41)(cid:39) our mar(cid:45)(cid:39)(cid:54) r(cid:39)(cid:50)u(cid:54)a(cid:54)(cid:43)o(cid:48)(cid:5) a(cid:48)(cid:38) (cid:50)r(cid:39)(cid:56)(cid:39)(cid:48)(cid:54) u(cid:53) (cid:40)rom ma(cid:43)(cid:48)(cid:54)a(cid:43)(cid:48)(cid:43)(cid:48)(cid:41) or (cid:43)(cid:48)(cid:37)r(cid:39)a(cid:53)(cid:43)(cid:48)(cid:41) our mar(cid:45)(cid:39)(cid:54) (cid:53)(cid:42)ar(cid:39)(cid:7) We perform a variety of module quality and life tests under different environmental conditions upon which we base our assessments of future module performance over the duration of the warranty. However, if our thin film solar modules perform below expectations, we could experience significant warranty and related expenses, damage to our market reputation, and erosion of our market share. With respect to our modules, we provide a limited warranty covering defects in materials and workmanship under normal use and service conditions for up to 12 years. We also typically warrant that modules installed in accordance with agreed(cid:12)upon specifications will produce at least 9(cid:23)(cid:5) of their labeled power output rating during the first year, with the warranty coverage reducing by a degradation factor every year thereafter throughout the limited power output warranty period of up to 30 years. Among other things, our solar module warranty also covers the resulting power output loss from cell cracking. As an alternative form of our standard limited module power output warranty, we have also offered an aggregated or system(cid:12)level limited module performance warranty. This system(cid:12)level limited module performance warranty is designed for utility(cid:12)scale systems and provides 25(cid:12)year system(cid:12)level energy degradation protection. This warranty represents a practical expedient to address the challenge of identifying, from the potential millions of modules installed in a utility(cid:12)scale system, individual modules that may be performing below warranty thresholds by focusing on the aggregate energy generated by the system rather than the power output of individual modules. The system(cid:12)level limited module performance warranty is typically calculated as a percentage of a system(cid:89)s expected energy production, ad(cid:61)usted for certain actual site conditions, with the warranted level of performance declining each year in a linear fashion, but never falling below (cid:23)0(cid:5) during the term of the warranty. As a result of these warranty programs, we bear the risk of product warranty claims long after we have sold our solar modules and recognized net sales. If any of the assumptions used in estimating our module warranties prove incorrect, we could be required to accrue additional expenses, which could adversely impact our financial position, operating results, and cash flows. Although we have taken significant precautions to avoid a manufacturing excursion from occurring, any manufacturing excursions, including any commitments made by us to take remediation actions in respect of affected modules beyond the stated remedies in our warranties, could adversely impact our reputation, financial position, operating results, and cash flows. Although our module performance warranties extend for up to 30 years, our oldest solar modules manufactured during the qualification of our pilot production line have only been in use since 2001. Accordingly, our warranties are based on a variety of quality and life tests that enable predictions of durability and future performance. These predictions, however, could prove to be materially different from the actual performance during the warranty period, causing us to incur substantial expense to repair or replace defective solar modules or provide financial remuneration in the future. For example, our solar modules could suffer various failure modes, including breakage, delamination, corrosion, or performance degradation in excess of expectations, and our manufacturing operations or supply chain could be sub(cid:61)ect to materials or process variations that could cause affected modules to fail or underperform compared to our expectations. These risks could be amplified as we implement design and process changes in connection with our efforts to improve our products and accelerate module wattage as part of our long(cid:12)term strategic plans. In addition, if we increase the number of installations in extreme climates, we may experience increased failure rates due to deployment into such field conditions. Any widespread product failures may damage our market reputation, cause our net sales to decline, require us to repair or replace the defective modules or provide financial remuneration, and result in us taking voluntary remedial measures beyond those required by our standard warranty terms to enhance customer satisfaction, which could have a material adverse effect on our operating results. In resolving claims under both the limited defect and power output warranties, we typically have the option of either repairing or replacing the covered modules or, under the limited power output warranty, providing additional 2(cid:23) modules to remedy the power shortfall or making certain cash payments(cid:26) however, historical versions of our module warranty did not provide a refund remedy. Consequently, we may be obligated to repair or replace the covered modules under such historical programs. As our manufacturing process may change from time(cid:12)to(cid:12)time in accordance with our technology roadmap, we may elect to stop production of older versions of our modules that would constitute compatible replacement modules. In some (cid:61)urisdictions, our inability to provide compatible replacement modules could potentially expose us to liabilities beyond the limitations of our module warranties, which could adversely impact our reputation, financial position, operating results, and cash flows. For P(cid:48) solar power systems constructed for customers, we typically provide limited warranties for defects in engineering design, installation, and BoS part workmanship for a period of one to two years following the substantial completion of a system or a block within the system. In resolving claims under such BoS warranties, we have the option of remedying the defect through repair or replacement. As with our modules, these warranties are based on a variety of quality and life tests that enable predictions of durability and future performance. Any failures in BoS equipment or system construction beyond our expectations may also adversely impact our reputation, financial position, operating results, and cash flows. In addition, our contracts with customers may include provisions with particular product specifications, minimum wattage requirements, and specified delivery schedules. These contracts may be terminated, or we may incur significant liquidated damages or other damages, if we fail to perform our contractual obligations. In addition, our costs to perform under these contracts may exceed our estimates, which could adversely impact our profitability. Any failures to comply with our contracts for the sale of our modules could adversely impact our reputation, financial position, operating results, and cash flows. (cid:26)ur (cid:40)a(cid:43)(cid:46)ur(cid:39) (cid:54)o (cid:40)ur(cid:54)(cid:42)(cid:39)r r(cid:39)(cid:40)(cid:43)(cid:48)(cid:39) our (cid:54)(cid:39)(cid:37)(cid:42)(cid:48)o(cid:46)o(cid:41)y(cid:5) r(cid:39)(cid:38)u(cid:37)(cid:39) mo(cid:38)u(cid:46)(cid:39) ma(cid:48)u(cid:40)a(cid:37)(cid:54)ur(cid:43)(cid:48)(cid:41) a(cid:48)(cid:38) (cid:14)oS (cid:37)o(cid:53)(cid:54)(cid:53)(cid:5) a(cid:48)(cid:38) (cid:38)(cid:39)(cid:56)(cid:39)(cid:46)o(cid:50) a(cid:48)(cid:38) (cid:43)(cid:48)(cid:54)ro(cid:38)u(cid:37)(cid:39) (cid:43)m(cid:50)ro(cid:56)(cid:39)(cid:38) (cid:27)(cid:33) (cid:50)ro(cid:38)u(cid:37)(cid:54)(cid:53) (cid:37)ou(cid:46)(cid:38) r(cid:39)(cid:48)(cid:38)(cid:39)r our (cid:53)o(cid:46)ar mo(cid:38)u(cid:46)(cid:39)(cid:53) or (cid:53)y(cid:53)(cid:54)(cid:39)m(cid:53) u(cid:48)(cid:37)om(cid:50)(cid:39)(cid:54)(cid:43)(cid:54)(cid:43)(cid:56)(cid:39) a(cid:48)(cid:38) r(cid:39)(cid:38)u(cid:37)(cid:39) our (cid:48)(cid:39)(cid:54) (cid:53)a(cid:46)(cid:39)(cid:53)(cid:5) (cid:50)ro(cid:40)(cid:43)(cid:54)a(cid:36)(cid:43)(cid:46)(cid:43)(cid:54)y(cid:5) a(cid:48)(cid:38)(cid:8)or mar(cid:45)(cid:39)(cid:54) (cid:53)(cid:42)ar(cid:39)(cid:7) We need to continue to invest significant financial resources in R(cid:6)D to continue to improve our module conversion efficiencies, lower the LCOE of our P(cid:48) solar power systems, and otherwise keep pace with technological advances in the solar industry. However, R(cid:6)D activities are inherently uncertain, and we could encounter practical difficulties in commercializing our research results. We seek to continuously improve our products and processes, including, for example, certain planned improvements to our Series (cid:21) module technology and manufacturing capabilities, such as the implementation of our copper replacement (or (cid:87)CuRe(cid:88)) program or the increase to our module form factor (which we refer to as (cid:87)Series (cid:21) Plus(cid:88)), and the resulting changes carry potential risks in the form of delays, performance, additional costs, or other unintended contingencies. In addition, our significant expenditures for R(cid:6)D may not produce corresponding benefits. Other companies are developing a variety of competing P(cid:48) technologies, including advanced multi(cid:12)crystalline silicon cells, PERC or advanced p(cid:12)type crystalline silicon cells, high(cid:12)efficiency n(cid:12)type crystalline silicon cells, bifacial solar modules, copper indium gallium diselenide thin films, amorphous silicon thin films, and new emerging technologies such as hybrid perovskites, which could produce solar modules or systems that prove more cost(cid:12)effective or have better performance than our solar modules or systems. In addition, other companies could potentially develop a highly reliable renewable energy system that mitigates the intermittent power generation drawback of many renewable energy systems, or offer other value(cid:12)added improvements from the perspective of utilities and other system owners, in which case such companies could compete with us even if the LCOE associated with such new systems is higher than that of our systems. As a result, our solar modules or systems may be negatively differentiated or rendered obsolete by the technological advances of our competitors, which would reduce our net sales, profitability, and/or market share. In addition, we often forward price our products and services in anticipation of future cost reductions and technology improvements, and thus, an inability to further refine our technology and execute our module technology and cost reduction roadmaps could adversely affect our operating results. 29 Som(cid:39) o(cid:40) our ma(cid:48)u(cid:40)a(cid:37)(cid:54)ur(cid:43)(cid:48)(cid:41) (cid:39)(cid:51)u(cid:43)(cid:50)m(cid:39)(cid:48)(cid:54) (cid:43)(cid:53) (cid:37)u(cid:53)(cid:54)om(cid:43)(cid:60)(cid:39)(cid:38) a(cid:48)(cid:38) (cid:53)o(cid:46)(cid:39) (cid:53)our(cid:37)(cid:39)(cid:38)(cid:7) (cid:20)(cid:40) our ma(cid:48)u(cid:40)a(cid:37)(cid:54)ur(cid:43)(cid:48)(cid:41) (cid:39)(cid:51)u(cid:43)(cid:50)m(cid:39)(cid:48)(cid:54) (cid:40)a(cid:43)(cid:46)(cid:53) or (cid:43)(cid:40) our (cid:39)(cid:51)u(cid:43)(cid:50)m(cid:39)(cid:48)(cid:54) (cid:53)u(cid:50)(cid:50)(cid:46)(cid:43)(cid:39)r(cid:53) (cid:40)a(cid:43)(cid:46) (cid:54)o (cid:50)(cid:39)r(cid:40)orm u(cid:48)(cid:38)(cid:39)r (cid:54)(cid:42)(cid:39)(cid:43)r (cid:37)o(cid:48)(cid:54)ra(cid:37)(cid:54)(cid:53)(cid:5) (cid:57)(cid:39) (cid:37)ou(cid:46)(cid:38) (cid:39)(cid:58)(cid:50)(cid:39)r(cid:43)(cid:39)(cid:48)(cid:37)(cid:39) (cid:50)ro(cid:38)u(cid:37)(cid:54)(cid:43)o(cid:48) (cid:38)(cid:43)(cid:53)ru(cid:50)(cid:54)(cid:43)o(cid:48)(cid:53) a(cid:48)(cid:38) (cid:36)(cid:39) u(cid:48)a(cid:36)(cid:46)(cid:39) (cid:54)o (cid:53)a(cid:54)(cid:43)(cid:53)(cid:40)y our (cid:37)o(cid:48)(cid:54)ra(cid:37)(cid:54)ua(cid:46) r(cid:39)(cid:51)u(cid:43)r(cid:39)m(cid:39)(cid:48)(cid:54)(cid:53)(cid:7) Some of our manufacturing equipment, including manufacturing equipment related to the production of our Series (cid:21) modules, is customized to our production lines based on designs or specifications that we provide to equipment manufacturers, which then undertake a specialized process to manufacture the custom equipment. As a result, the equipment is not readily available from multiple vendors and would be difficult to repair or replace if it were to become delayed, damaged, or stop working. If any piece of equipment fails, production along the entire production line could be interrupted. In addition, the failure of our equipment manufacturers to supply equipment in a timely manner or on commercially reasonable terms could delay our expansion or conversion plans, otherwise disrupt our production schedule, and/or increase our manufacturing costs, all of which would adversely impact our operating results. S(cid:39)(cid:56)(cid:39)ra(cid:46) o(cid:40) our (cid:45)(cid:39)y ra(cid:57) ma(cid:54)(cid:39)r(cid:43)a(cid:46)(cid:53) a(cid:48)(cid:38) (cid:37)om(cid:50)o(cid:48)(cid:39)(cid:48)(cid:54)(cid:53) ar(cid:39) (cid:39)(cid:43)(cid:54)(cid:42)(cid:39)r (cid:53)(cid:43)(cid:48)(cid:41)(cid:46)(cid:39)-(cid:53)our(cid:37)(cid:39)(cid:38) or (cid:53)our(cid:37)(cid:39)(cid:38) (cid:40)rom a (cid:46)(cid:43)m(cid:43)(cid:54)(cid:39)(cid:38) (cid:48)um(cid:36)(cid:39)r o(cid:40) (cid:53)u(cid:50)(cid:50)(cid:46)(cid:43)(cid:39)r(cid:53)(cid:5) a(cid:48)(cid:38) (cid:54)(cid:42)(cid:39)(cid:43)r (cid:40)a(cid:43)(cid:46)ur(cid:39) (cid:54)o (cid:50)(cid:39)r(cid:40)orm (cid:37)ou(cid:46)(cid:38) (cid:37)au(cid:53)(cid:39) ma(cid:48)u(cid:40)a(cid:37)(cid:54)ur(cid:43)(cid:48)(cid:41) (cid:38)(cid:39)(cid:46)ay(cid:53) a(cid:48)(cid:38) (cid:43)m(cid:50)a(cid:43)r our a(cid:36)(cid:43)(cid:46)(cid:43)(cid:54)y (cid:54)o (cid:38)(cid:39)(cid:46)(cid:43)(cid:56)(cid:39)r (cid:53)o(cid:46)ar mo(cid:38)u(cid:46)(cid:39)(cid:53) (cid:54)o (cid:37)u(cid:53)(cid:54)om(cid:39)r(cid:53) (cid:43)(cid:48) (cid:54)(cid:42)(cid:39) r(cid:39)(cid:51)u(cid:43)r(cid:39)(cid:38) (cid:51)ua(cid:46)(cid:43)(cid:54)y a(cid:48)(cid:38) (cid:51)ua(cid:48)(cid:54)(cid:43)(cid:54)(cid:43)(cid:39)(cid:53) a(cid:48)(cid:38) a(cid:54) a (cid:50)r(cid:43)(cid:37)(cid:39) (cid:54)(cid:42)a(cid:54) (cid:43)(cid:53) (cid:50)ro(cid:40)(cid:43)(cid:54)a(cid:36)(cid:46)(cid:39) (cid:54)o u(cid:53)(cid:7) Our failure to obtain raw materials and components that meet our quality, quantity, and cost requirements in a timely manner could interrupt or impair our ability to manufacture our solar modules or increase our manufacturing costs. Several of our key raw materials and components are either single(cid:12)sourced or sourced from a limited number of suppliers. As a result, the failure of any of our suppliers to perform could disrupt our supply chain and adversely impact our operations. In addition, some of our suppliers are smaller companies that may be unable to supply our increasing demand for raw materials and components as we expand our business. We may be unable to identify new suppliers or qualify their products for use on our production lines in a timely manner and on commercially reasonable terms. A constraint on our production may result in our inability to meet our capacity plans and/or our obligations under our customer contracts, which would have an adverse impact on our business. Additionally, reductions in our production volume may put pressure on suppliers, resulting in increased material and component costs. (cid:13) (cid:38)(cid:43)(cid:53)ru(cid:50)(cid:54)(cid:43)o(cid:48) (cid:43)(cid:48) our (cid:53)u(cid:50)(cid:50)(cid:46)y (cid:37)(cid:42)a(cid:43)(cid:48) (cid:40)or (cid:15)(cid:38)(cid:31)(cid:39) (cid:37)ou(cid:46)(cid:38) (cid:43)(cid:48)(cid:54)(cid:39)rru(cid:50)(cid:54) or (cid:43)m(cid:50)a(cid:43)r our a(cid:36)(cid:43)(cid:46)(cid:43)(cid:54)y (cid:54)o ma(cid:48)u(cid:40)a(cid:37)(cid:54)ur(cid:39) (cid:53)o(cid:46)ar mo(cid:38)u(cid:46)(cid:39)(cid:53) a(cid:48)(cid:38) (cid:37)ou(cid:46)(cid:38) a(cid:38)(cid:56)(cid:39)r(cid:53)(cid:39)(cid:46)y (cid:43)m(cid:50)a(cid:37)(cid:54) our (cid:50)ro(cid:40)(cid:43)(cid:54)a(cid:36)(cid:43)(cid:46)(cid:43)(cid:54)y a(cid:48)(cid:38) (cid:46)o(cid:48)(cid:41)-(cid:54)(cid:39)rm (cid:41)ro(cid:57)(cid:54)(cid:42) (cid:50)ro(cid:53)(cid:50)(cid:39)(cid:37)(cid:54)(cid:53)(cid:7) A key raw material used in our module production process is a CdTe compound. Tellurium, one of the main components of CdTe, is mainly produced as a by(cid:12)product of copper refining, and therefore, its supply is largely dependent upon demand for copper. Our supply of CdTe could be limited if any of our current suppliers or any of our future suppliers fail to perform or are unable to acquire an adequate supply of tellurium in a timely manner or at commercially reasonable prices. If our current suppliers or any of our future suppliers cannot obtain sufficient tellurium, they could substantially increase prices or be unable to perform under their contracts. Furthermore, if our competitors begin to use or increase their demand for tellurium, our requirements for tellurium increase, new applications for tellurium become available, or adverse trade laws or policies restrict our ability to obtain tellurium from foreign vendors or make doing so cost prohibitive, the supply of tellurium and related CdTe compounds could be reduced and prices could increase. As we may be unable to pass such increases in the costs of our raw materials through to our customers, a substantial increase in tellurium prices or any limitations in the supply of tellurium could adversely impact our profitability and long(cid:12)term growth ob(cid:61)ectives. 30 (cid:26)ur (cid:40)u(cid:54)ur(cid:39) (cid:53)u(cid:37)(cid:37)(cid:39)(cid:53)(cid:53) (cid:38)(cid:39)(cid:50)(cid:39)(cid:48)(cid:38)(cid:53) o(cid:48) our a(cid:36)(cid:43)(cid:46)(cid:43)(cid:54)y (cid:54)o (cid:39)(cid:40)(cid:40)(cid:39)(cid:37)(cid:54)(cid:43)(cid:56)(cid:39)(cid:46)y (cid:36)a(cid:46)a(cid:48)(cid:37)(cid:39) ma(cid:48)u(cid:40)a(cid:37)(cid:54)ur(cid:43)(cid:48)(cid:41) (cid:50)ro(cid:38)u(cid:37)(cid:54)(cid:43)o(cid:48) (cid:57)(cid:43)(cid:54)(cid:42) mar(cid:45)(cid:39)(cid:54) (cid:38)(cid:39)ma(cid:48)(cid:38)(cid:5) (cid:37)o(cid:48)(cid:56)(cid:39)r(cid:54) (cid:39)(cid:58)(cid:43)(cid:53)(cid:54)(cid:43)(cid:48)(cid:41) (cid:50)ro(cid:38)u(cid:37)(cid:54)(cid:43)o(cid:48) (cid:40)a(cid:37)(cid:43)(cid:46)(cid:43)(cid:54)(cid:43)(cid:39)(cid:53) (cid:54)o (cid:53)u(cid:50)(cid:50)or(cid:54) (cid:48)(cid:39)(cid:57) (cid:50)ro(cid:38)u(cid:37)(cid:54) (cid:46)(cid:43)(cid:48)(cid:39)(cid:53)(cid:5) (cid:38)(cid:39)(cid:37)r(cid:39)a(cid:53)(cid:39) our (cid:37)o(cid:53)(cid:54) (cid:50)(cid:39)r (cid:57)a(cid:54)(cid:54)(cid:5) a(cid:48)(cid:38)(cid:5) (cid:57)(cid:42)(cid:39)(cid:48) (cid:48)(cid:39)(cid:37)(cid:39)(cid:53)(cid:53)ary(cid:5) (cid:37)o(cid:48)(cid:54)(cid:43)(cid:48)u(cid:39) (cid:54)o (cid:36)u(cid:43)(cid:46)(cid:38) (cid:48)(cid:39)(cid:57) ma(cid:48)u(cid:40)a(cid:37)(cid:54)ur(cid:43)(cid:48)(cid:41) (cid:50)(cid:46)a(cid:48)(cid:54)(cid:53) o(cid:56)(cid:39)r (cid:54)(cid:43)m(cid:39) (cid:43)(cid:48) r(cid:39)(cid:53)(cid:50)o(cid:48)(cid:53)(cid:39) (cid:54)o mar(cid:45)(cid:39)(cid:54) (cid:38)(cid:39)ma(cid:48)(cid:38)(cid:5) a(cid:46)(cid:46) o(cid:40) (cid:57)(cid:42)(cid:43)(cid:37)(cid:42) ar(cid:39) (cid:53)u(cid:36)(cid:44)(cid:39)(cid:37)(cid:54) (cid:54)o r(cid:43)(cid:53)(cid:45)(cid:53) a(cid:48)(cid:38) u(cid:48)(cid:37)(cid:39)r(cid:54)a(cid:43)(cid:48)(cid:54)(cid:43)(cid:39)(cid:53)(cid:7) Our future success depends on our ability to effectively balance manufacturing production with market demand, convert existing production facilities to support new product lines, decrease our cost per watt, and increase our manufacturing capacity in a cost(cid:12)effective and efficient manner. If we cannot do so, we may be unable to decrease our cost per watt, maintain our competitive position, sustain profitability, expand our business, or create long(cid:12)term shareholder value. Our ability to decrease our cost per watt, expand production capacity, or convert existing production facilities to support new product lines is sub(cid:61)ect to significant risks and uncertainties, including the following: (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) failure to reduce manufacturing material, labor, or overhead costs(cid:26) an inability to increase production throughput or the average power output per module(cid:26) failure to effectively manage logistics costs associated with the shipping, handling, storage, and distribution of our modules(cid:26) delays and cost overruns as a result of a number of factors, many of which may be beyond our control, such as our inability to secure successful contracts with equipment vendors(cid:26) our custom(cid:12)built equipment taking longer and costing more to manufacture than expected and not operating as designed(cid:26) delays or denial of required approvals by relevant government authorities(cid:26) an inability to hire qualified staff(cid:26) failure to execute our expansion or conversion plans effectively(cid:26) difficulty in balancing market demand and manufacturing production in an efficient and timely manner, potentially causing our manufacturing capacity to be constrained in some future periods or over(cid:12)supplied in others(cid:26) and incurring manufacturing asset write(cid:12)downs, write(cid:12)offs, and other charges and costs, which may be significant, during those periods in which we idle, slow down, shut down, convert, or otherwise ad(cid:61)ust our manufacturing capacity. (cid:20)(cid:40) our (cid:39)(cid:53)(cid:54)(cid:43)ma(cid:54)(cid:39)(cid:53) r(cid:39)(cid:41)ar(cid:38)(cid:43)(cid:48)(cid:41) (cid:54)(cid:42)(cid:39) (cid:40)u(cid:54)ur(cid:39) (cid:37)o(cid:53)(cid:54)(cid:53) o(cid:40) (cid:37)o(cid:46)(cid:46)(cid:39)(cid:37)(cid:54)(cid:43)(cid:48)(cid:41) a(cid:48)(cid:38) r(cid:39)(cid:37)y(cid:37)(cid:46)(cid:43)(cid:48)(cid:41) (cid:15)(cid:38)(cid:31)(cid:39) (cid:53)o(cid:46)ar mo(cid:38)u(cid:46)(cid:39)(cid:53) (cid:37)o(cid:56)(cid:39)r(cid:39)(cid:38) (cid:36)y our (cid:53)o(cid:46)ar mo(cid:38)u(cid:46)(cid:39) (cid:37)o(cid:46)(cid:46)(cid:39)(cid:37)(cid:54)(cid:43)o(cid:48) a(cid:48)(cid:38) r(cid:39)(cid:37)y(cid:37)(cid:46)(cid:43)(cid:48)(cid:41) (cid:50)ro(cid:41)ram ar(cid:39) (cid:43)(cid:48)(cid:37)orr(cid:39)(cid:37)(cid:54)(cid:5) (cid:57)(cid:39) (cid:37)ou(cid:46)(cid:38) (cid:36)(cid:39) r(cid:39)(cid:51)u(cid:43)r(cid:39)(cid:38) (cid:54)o a(cid:37)(cid:37)ru(cid:39) a(cid:38)(cid:38)(cid:43)(cid:54)(cid:43)o(cid:48)a(cid:46) (cid:39)(cid:58)(cid:50)(cid:39)(cid:48)(cid:53)(cid:39)(cid:53) a(cid:48)(cid:38) (cid:40)a(cid:37)(cid:39) a (cid:53)(cid:43)(cid:41)(cid:48)(cid:43)(cid:40)(cid:43)(cid:37)a(cid:48)(cid:54) u(cid:48)(cid:50)(cid:46)a(cid:48)(cid:48)(cid:39)(cid:38) (cid:37)a(cid:53)(cid:42) (cid:36)ur(cid:38)(cid:39)(cid:48)(cid:7) As necessary, we fund any incremental amounts for our estimated collection and recycling obligations on an annual basis based on the estimated costs of collecting and recycling covered modules, estimated rates of return on our restricted marketable securities, and an estimated solar module life of 25 years less amounts already funded in prior years. We estimate the cost of our collection and recycling obligations based on the present value of the expected future cost of collecting and recycling the solar modules, which includes estimates for the cost of packaging materials(cid:26) the cost of freight from the solar module installation sites to a recycling center(cid:26) material, labor, and capital costs(cid:26) and by(cid:12)product credits for certain materials recovered during the recycling process. We base these estimates on our experience collecting and recycling solar modules and certain assumptions regarding costs at the time the 31 solar modules will be collected and recycled. If our estimates prove incorrect, we could be required to accrue additional expenses and could also face a significant unplanned cash burden at the time we realize our estimates are incorrect or end users return their modules, which could adversely affect our operating results. In addition, participating end users can return their modules covered under the collection and recycling program at any time. As a result, we could be required to collect and recycle covered CdTe solar modules earlier than we expect. (cid:26)ur (cid:40)a(cid:43)(cid:46)ur(cid:39) (cid:54)o (cid:50)ro(cid:54)(cid:39)(cid:37)(cid:54) our (cid:43)(cid:48)(cid:54)(cid:39)(cid:46)(cid:46)(cid:39)(cid:37)(cid:54)ua(cid:46) (cid:50)ro(cid:50)(cid:39)r(cid:54)y r(cid:43)(cid:41)(cid:42)(cid:54)(cid:53) may u(cid:48)(cid:38)(cid:39)rm(cid:43)(cid:48)(cid:39) our (cid:37)om(cid:50)(cid:39)(cid:54)(cid:43)(cid:54)(cid:43)(cid:56)(cid:39) (cid:50)o(cid:53)(cid:43)(cid:54)(cid:43)o(cid:48)(cid:5) a(cid:48)(cid:38) (cid:46)(cid:43)(cid:54)(cid:43)(cid:41)a(cid:54)(cid:43)o(cid:48) (cid:54)o (cid:50)ro(cid:54)(cid:39)(cid:37)(cid:54) our (cid:43)(cid:48)(cid:54)(cid:39)(cid:46)(cid:46)(cid:39)(cid:37)(cid:54)ua(cid:46) (cid:50)ro(cid:50)(cid:39)r(cid:54)y r(cid:43)(cid:41)(cid:42)(cid:54)(cid:53) or (cid:38)(cid:39)(cid:40)(cid:39)(cid:48)(cid:38) a(cid:41)a(cid:43)(cid:48)(cid:53)(cid:54) (cid:54)(cid:42)(cid:43)r(cid:38)-(cid:50)ar(cid:54)y a(cid:46)(cid:46)(cid:39)(cid:41)a(cid:54)(cid:43)o(cid:48)(cid:53) o(cid:40) (cid:43)(cid:48)(cid:40)r(cid:43)(cid:48)(cid:41)(cid:39)m(cid:39)(cid:48)(cid:54) may (cid:36)(cid:39) (cid:37)o(cid:53)(cid:54)(cid:46)y(cid:7) Protection of our proprietary processes, methods, and other technology is critical to our business. Failure to protect and monitor the use of our existing intellectual property rights could result in the loss of valuable technologies. We rely primarily on patents, trademarks, trade secrets, copyrights, and contractual restrictions to protect our intellectual property. We regularly file patent applications to protect certain inventions arising from our R(cid:6)D and are currently pursuing such patent applications in various countries in accordance with our strategy for intellectual property in that (cid:61)urisdiction. Our existing patents and future patents could be challenged, invalidated, circumvented, or rendered unenforceable. Our pending patent applications may not result in issued patents, or if patents are issued to us, such patents may not be sufficient to provide meaningful protection against competitors or against competitive technologies. We also rely on unpatented proprietary manufacturing expertise, continuing technological innovation, and other trade secrets to develop and maintain our competitive position. Although we generally enter into confidentiality agreements with our associates and third parties to protect our intellectual property, such confidentiality agreements are limited in duration and could be breached and may not provide meaningful protection for our trade secrets or proprietary manufacturing expertise. Adequate remedies may not be available in the event of unauthorized use or disclosure of our trade secrets and manufacturing expertise. In addition, others may obtain knowledge of our trade secrets through independent development or legal means. The failure of our patents or confidentiality agreements to protect our processes, equipment, technology, trade secrets, and proprietary manufacturing expertise, methods, and compounds could have a material adverse effect on our business. In addition, effective patent, trademark, copyright, and trade secret protection may be unavailable or limited in some foreign countries, especially any developing countries into which we may expand our operations. In some countries, we have not applied for patent, trademark, or copyright protection. Third parties may infringe or misappropriate our proprietary technologies or other intellectual property rights, which could have a material adverse effect on our business, financial condition, and operating results. Policing unauthorized use of proprietary technology can be difficult and expensive. Additionally, litigation may be necessary to enforce our intellectual property rights, protect our trade secrets, or determine the validity and scope of the proprietary rights of others. We cannot ensure that the outcome of such potential litigation will be in our favor, and such litigation may be costly and may divert management attention and other resources away from our business. An adverse determination in any such litigation may impair our intellectual property rights and may harm our business, prospects, and reputation. In addition, we have no insurance coverage against such litigation costs and would have to bear all costs arising from such litigation to the extent we are unable to recover them from other parties. (cid:20)(cid:40) a(cid:48)y (cid:40)u(cid:54)ur(cid:39) (cid:50)ro(cid:38)u(cid:37)(cid:54)(cid:43)o(cid:48) (cid:46)(cid:43)(cid:48)(cid:39)(cid:53) ar(cid:39) (cid:48)o(cid:54) (cid:36)u(cid:43)(cid:46)(cid:54) (cid:43)(cid:48) (cid:46)(cid:43)(cid:48)(cid:39) (cid:57)(cid:43)(cid:54)(cid:42) (cid:37)omm(cid:43)(cid:54)(cid:54)(cid:39)(cid:38) (cid:53)(cid:37)(cid:42)(cid:39)(cid:38)u(cid:46)(cid:39)(cid:53)(cid:5) (cid:43)(cid:54) may a(cid:38)(cid:56)(cid:39)r(cid:53)(cid:39)(cid:46)y a(cid:40)(cid:40)(cid:39)(cid:37)(cid:54) our (cid:40)u(cid:54)ur(cid:39) (cid:41)ro(cid:57)(cid:54)(cid:42) (cid:50)(cid:46)a(cid:48)(cid:53)(cid:7) (cid:20)(cid:40) a(cid:48)y (cid:40)u(cid:54)ur(cid:39) (cid:50)ro(cid:38)u(cid:37)(cid:54)(cid:43)o(cid:48) (cid:46)(cid:43)(cid:48)(cid:39)(cid:53) (cid:38)o (cid:48)o(cid:54) a(cid:37)(cid:42)(cid:43)(cid:39)(cid:56)(cid:39) o(cid:50)(cid:39)ra(cid:54)(cid:43)(cid:48)(cid:41) m(cid:39)(cid:54)r(cid:43)(cid:37)(cid:53) (cid:53)(cid:43)m(cid:43)(cid:46)ar (cid:54)o our (cid:39)(cid:58)(cid:43)(cid:53)(cid:54)(cid:43)(cid:48)(cid:41) (cid:50)ro(cid:38)u(cid:37)(cid:54)(cid:43)o(cid:48) (cid:46)(cid:43)(cid:48)(cid:39)(cid:53)(cid:5) our (cid:53)o(cid:46)ar mo(cid:38)u(cid:46)(cid:39)(cid:53) (cid:37)ou(cid:46)(cid:38) (cid:50)(cid:39)r(cid:40)orm (cid:36)(cid:39)(cid:46)o(cid:57) (cid:39)(cid:58)(cid:50)(cid:39)(cid:37)(cid:54)a(cid:54)(cid:43)o(cid:48)(cid:53) a(cid:48)(cid:38) (cid:37)au(cid:53)(cid:39) u(cid:53) (cid:54)o (cid:46)o(cid:53)(cid:39) (cid:37)u(cid:53)(cid:54)om(cid:39)r(cid:53)(cid:7) If we are unable to systematically replicate our production lines over time and achieve operating metrics similar to our existing production lines, our manufacturing capacity could be substantially constrained, our manufacturing costs per watt could increase, and our growth could be limited. Such factors may result in lower net sales and lower net income than we anticipate. For instance, future production lines could produce solar modules that have lower conversion efficiencies, higher failure rates, and/or higher rates of degradation than solar modules from our existing 32 production lines, and we could be unable to determine the cause of the lower operating metrics or develop and implement solutions to improve performance. (cid:26)ur (cid:53)u(cid:36)(cid:53)(cid:54)a(cid:48)(cid:54)(cid:43)a(cid:46) (cid:43)(cid:48)(cid:54)(cid:39)r(cid:48)a(cid:54)(cid:43)o(cid:48)a(cid:46) o(cid:50)(cid:39)ra(cid:54)(cid:43)o(cid:48)(cid:53) (cid:53)u(cid:36)(cid:44)(cid:39)(cid:37)(cid:54) u(cid:53) (cid:54)o a (cid:48)um(cid:36)(cid:39)r o(cid:40) r(cid:43)(cid:53)(cid:45)(cid:53)(cid:5) (cid:43)(cid:48)(cid:37)(cid:46)u(cid:38)(cid:43)(cid:48)(cid:41) u(cid:48)(cid:40)a(cid:56)ora(cid:36)(cid:46)(cid:39) (cid:50)o(cid:46)(cid:43)(cid:54)(cid:43)(cid:37)a(cid:46)(cid:5) r(cid:39)(cid:41)u(cid:46)a(cid:54)ory(cid:5) (cid:46)a(cid:36)or(cid:5) a(cid:48)(cid:38) (cid:54)a(cid:58) (cid:37)o(cid:48)(cid:38)(cid:43)(cid:54)(cid:43)o(cid:48)(cid:53) (cid:43)(cid:48) (cid:54)(cid:42)(cid:39) (cid:32)(cid:48)(cid:43)(cid:54)(cid:39)(cid:38) S(cid:54)a(cid:54)(cid:39)(cid:53) a(cid:48)(cid:38)(cid:8)or (cid:40)or(cid:39)(cid:43)(cid:41)(cid:48) (cid:37)ou(cid:48)(cid:54)r(cid:43)(cid:39)(cid:53)(cid:7) We have significant manufacturing, development, sales, and marketing operations both within and outside the United States and expect to continue to expand our operations worldwide. As a result, we are sub(cid:61)ect to the legal, political, social, tax, and regulatory requirements and economic conditions of many (cid:61)urisdictions. Risks inherent to international operations include, but are not limited to, the following: (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) difficulty in enforcing agreements in foreign legal systems(cid:26) varying degrees of protection afforded to foreign investments in the countries in which we operate and irregular interpretations and enforcement of laws and regulations in such (cid:61)urisdictions(cid:26) foreign countries may impose additional income and withholding taxes or otherwise tax our foreign operations, impose tariffs, or adopt other restrictions on foreign trade and investment, including currency exchange controls(cid:26) fluctuations in exchange rates may affect demand for our products and services and may adversely affect our profitability and cash flows in U.S. dollars to the extent that our net sales or our costs are denominated in a foreign currency and the cost associated with hedging the U.S. dollar equivalent of such exposures is prohibitive(cid:26) the longer the duration of such foreign currency exposure, the greater the risk(cid:26) anti(cid:12)corruption compliance issues, including the costs related to the mitigation of such risk(cid:26) risk of nationalization or other expropriation of private enterprises(cid:26) changes in general economic and political conditions in the countries in which we operate, including changes in government incentive provisions(cid:26) unexpected adverse changes in U.S. or foreign laws or regulatory requirements, including those with respect to environmental protection, import or export duties, and quotas(cid:26) opaque approval processes in which the lack of transparency may cause delays and increase the uncertainty of pro(cid:61)ect approvals(cid:26) difficulty in staffing and managing widespread operations(cid:26) difficulty in repatriating earnings(cid:26) difficulty in negotiating a successful collective bargaining agreement in applicable foreign (cid:61)urisdictions(cid:26) trade barriers such as export requirements, tariffs, taxes, local content requirements, anti(cid:12)dumping regulations and requirements, and other restrictions and expenses, which could increase the effective price of our solar modules and make us less competitive in some countries or increase the costs to perform under our existing contracts(cid:26) and difficulty of, and costs relating to, compliance with the different commercial and legal requirements of the overseas countries in which we offer and sell our solar modules. 33 Our business in foreign markets requires us to respond to rapid changes in market conditions in these countries. Our overall success as a global business depends, in part, on our ability to succeed in differing legal, regulatory, economic, social, and political conditions. We may not be able to timely develop and implement policies and strategies that will be effective in each location where we do business. Ri(cid:66)(cid:58)(cid:66) Relate(cid:51) t(cid:62) Our S(cid:72)(cid:66)te(cid:60)(cid:66) (cid:24)u(cid:66)ine(cid:66)(cid:66) (cid:27)ro(cid:44)(cid:39)(cid:37)(cid:54) (cid:38)(cid:39)(cid:56)(cid:39)(cid:46)o(cid:50)m(cid:39)(cid:48)(cid:54) or (cid:37)o(cid:48)(cid:53)(cid:54)ru(cid:37)(cid:54)(cid:43)o(cid:48) a(cid:37)(cid:54)(cid:43)(cid:56)(cid:43)(cid:54)(cid:43)(cid:39)(cid:53) may (cid:48)o(cid:54) (cid:36)(cid:39) (cid:53)u(cid:37)(cid:37)(cid:39)(cid:53)(cid:53)(cid:40)u(cid:46)(cid:12) (cid:50)ro(cid:44)(cid:39)(cid:37)(cid:54)(cid:53) u(cid:48)(cid:38)(cid:39)r (cid:38)(cid:39)(cid:56)(cid:39)(cid:46)o(cid:50)m(cid:39)(cid:48)(cid:54) may (cid:48)o(cid:54) r(cid:39)(cid:37)(cid:39)(cid:43)(cid:56)(cid:39) r(cid:39)(cid:51)u(cid:43)r(cid:39)(cid:38) (cid:50)(cid:39)rm(cid:43)(cid:54)(cid:53)(cid:5) r(cid:39)a(cid:46) (cid:50)ro(cid:50)(cid:39)r(cid:54)y r(cid:43)(cid:41)(cid:42)(cid:54)(cid:53)(cid:5) (cid:27)(cid:27)(cid:13)(cid:53)(cid:5) (cid:43)(cid:48)(cid:54)(cid:39)r(cid:37)o(cid:48)(cid:48)(cid:39)(cid:37)(cid:54)(cid:43)o(cid:48)(cid:5) a(cid:48)(cid:38) (cid:54)ra(cid:48)(cid:53)m(cid:43)(cid:53)(cid:53)(cid:43)o(cid:48) arra(cid:48)(cid:41)(cid:39)m(cid:39)(cid:48)(cid:54)(cid:53)(cid:12) or (cid:40)(cid:43)(cid:48)a(cid:48)(cid:37)(cid:43)(cid:48)(cid:41) or (cid:37)o(cid:48)(cid:53)(cid:54)ru(cid:37)(cid:54)(cid:43)o(cid:48) may (cid:48)o(cid:54) (cid:37)omm(cid:39)(cid:48)(cid:37)(cid:39) or (cid:50)ro(cid:37)(cid:39)(cid:39)(cid:38) a(cid:53) (cid:53)(cid:37)(cid:42)(cid:39)(cid:38)u(cid:46)(cid:39)(cid:38)(cid:5) (cid:57)(cid:42)(cid:43)(cid:37)(cid:42) (cid:37)ou(cid:46)(cid:38) (cid:43)(cid:48)(cid:37)r(cid:39)a(cid:53)(cid:39) our (cid:37)o(cid:53)(cid:54)(cid:53) a(cid:48)(cid:38) (cid:43)m(cid:50)a(cid:43)r our a(cid:36)(cid:43)(cid:46)(cid:43)(cid:54)y (cid:54)o r(cid:39)(cid:37)o(cid:56)(cid:39)r our (cid:43)(cid:48)(cid:56)(cid:39)(cid:53)(cid:54)m(cid:39)(cid:48)(cid:54)(cid:53)(cid:7) The development and construction of solar energy generation facilities and other energy infrastructure pro(cid:61)ects involve numerous risks. We may be required to spend significant sums for land and interconnection rights, preliminary engineering, permitting, legal services, and other expenses before we can determine whether a pro(cid:61)ect is feasible, economically attractive, or capable of being built. Success in developing a particular pro(cid:61)ect is contingent upon, among other things: (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) obtaining financeable land rights, including land rights for the pro(cid:61)ect site, transmission lines, and environmental mitigation(cid:26) entering into financeable arrangements for the purchase of the electrical output, capacity, ancillary services, and renewable energy attributes generated by the pro(cid:61)ect(cid:26) receipt from governmental agencies of required environmental, land(cid:12)use, and construction and operation permits and approvals(cid:26) receipt of tribal government approvals for pro(cid:61)ects on tribal land(cid:26) receipt of governmental approvals related to the presence of any protected or endangered species or habitats, migratory birds, wetlands or other (cid:61)urisdictional water resources, and/or cultural resources(cid:26) negotiation of development agreements, public benefit agreements, and other agreements to compensate local governments for pro(cid:61)ect impacts(cid:26) negotiation of state and local tax abatement and incentive agreements(cid:26) receipt of rights to interconnect the pro(cid:61)ect to the electric grid or to transmit energy(cid:26) negotiation of satisfactory EPC agreements, including agreements with third(cid:12)party EPC providers(cid:26) securing necessary rights of way for access and transmission lines(cid:26) securing necessary water rights for pro(cid:61)ect construction and operation(cid:26) securing appropriate title coverage, including coverage for mineral rights, mechanics(cid:89) liens, etc.(cid:26) obtaining financing, including debt, equity, and funds associated with the monetization of tax credits and other tax benefits(cid:26) payment of PPA, interconnection, and other deposits (some of which are non(cid:12)refundable)(cid:26) 34 (cid:82) (cid:82) providing required payment and performance security for the development of the pro(cid:61)ect, such as through the provision of letters of credit(cid:26) and timely implementation and satisfactory completion of construction. Successful completion of a particular pro(cid:61)ect may be adversely affected, delayed and/or rendered infeasible by numerous factors, including: (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:61) (cid:82) (cid:82) (cid:82) delays in obtaining and maintaining required governmental permits and approvals, including appeals of approvals obtained(cid:26) potential permit and environmental organizations, labor organizations, tribes, and others who may oppose the pro(cid:61)ect(cid:26) litigation challenges from pro(cid:61)ect stakeholders, including local residents, in connection with any such permit and litigation challenges, grants of in(cid:61)unctive relief to stop development and/or construction of a pro(cid:61)ect(cid:26) discovery of unknown impacts to protected or endangered species or habitats, migratory birds, wetlands or other (cid:61)urisdictional water resources, and/or cultural resources at pro(cid:61)ect sites(cid:26) discovery of unknown title defects(cid:26) discovery of unknown environmental conditions(cid:26) unforeseen engineering problems(cid:26) construction delays and contractor performance shortfalls(cid:26) work stoppages(cid:26) cost over(cid:12)runs(cid:26) labor, equipment, and material supply shortages, failures, or disruptions(cid:26) cost or schedule impacts arising from changes in federal, state, or local land(cid:12)use or regulatory policies(cid:26) changes in electric utility procurement practices(cid:26) risks arising from potential transmission grid congestion, limited transmission capacity, and grid reliability constraints(cid:26) pro(cid:61)ect delays that could adversely impact our ability to maintain interconnection rights(cid:26) additional complexities when conducting pro(cid:61)ect development or construction activities in foreign (cid:61)urisdictions (either on a stand(cid:12)alone basis or in collaboration with local business partners), including operating in accordance with the FCPA and applicable local laws and customs(cid:26) unfavorable tax treatment or adverse changes to tax policy(cid:26) adverse weather conditions(cid:26) water shortages(cid:26) 35 (cid:82) (cid:82) (cid:82) (cid:82) adverse environmental and geological conditions(cid:26) force ma(cid:61)eure and other events out of our control(cid:26) climate change(cid:26) and change in law risks. If we fail to complete the development of a solar energy pro(cid:61)ect, fail to meet one or more agreed upon target construction milestone dates, fail to achieve system(cid:12)level capacity, or fail to meet other contract terms, we may be sub(cid:61)ect to forfeiture of significant deposits under PPAs or interconnection agreements or termination of such agreements, incur significant liquidated damages, penalties, and/or other obligations under other pro(cid:61)ect related agreements, and may not be able to recover our investment in the pro(cid:61)ect. If we are unable to complete the development of a solar energy pro(cid:61)ect, we may impair some or all of these capitalized investments, which would have an adverse impact on our net income in the period in which the loss is recognized. (cid:34)(cid:39) may (cid:36)(cid:39) u(cid:48)a(cid:36)(cid:46)(cid:39) (cid:54)o a(cid:37)(cid:51)u(cid:43)r(cid:39) or (cid:46)(cid:39)a(cid:53)(cid:39) (cid:46)a(cid:48)(cid:38)(cid:5) o(cid:36)(cid:54)a(cid:43)(cid:48) (cid:48)(cid:39)(cid:37)(cid:39)(cid:53)(cid:53)ary (cid:43)(cid:48)(cid:54)(cid:39)r(cid:37)o(cid:48)(cid:48)(cid:39)(cid:37)(cid:54)(cid:43)o(cid:48) a(cid:48)(cid:38) (cid:54)ra(cid:48)(cid:53)m(cid:43)(cid:53)(cid:53)(cid:43)o(cid:48) r(cid:43)(cid:41)(cid:42)(cid:54)(cid:53)(cid:5) a(cid:48)(cid:38)(cid:8)or o(cid:36)(cid:54)a(cid:43)(cid:48) (cid:54)(cid:42)(cid:39) a(cid:50)(cid:50)ro(cid:56)a(cid:46)(cid:53)(cid:5) (cid:46)(cid:43)(cid:37)(cid:39)(cid:48)(cid:53)(cid:39)(cid:53)(cid:5) (cid:50)(cid:39)rm(cid:43)(cid:54)(cid:53)(cid:5) a(cid:48)(cid:38) (cid:39)(cid:46)(cid:39)(cid:37)(cid:54)r(cid:43)(cid:37) (cid:54)ra(cid:48)(cid:53)m(cid:43)(cid:53)(cid:53)(cid:43)o(cid:48) (cid:41)r(cid:43)(cid:38) (cid:43)(cid:48)(cid:54)(cid:39)r(cid:37)o(cid:48)(cid:48)(cid:39)(cid:37)(cid:54)(cid:43)o(cid:48) a(cid:48)(cid:38) (cid:54)ra(cid:48)(cid:53)m(cid:43)(cid:53)(cid:53)(cid:43)o(cid:48) r(cid:43)(cid:41)(cid:42)(cid:54)(cid:53) (cid:48)(cid:39)(cid:37)(cid:39)(cid:53)(cid:53)ary (cid:54)o (cid:36)u(cid:43)(cid:46)(cid:38) a(cid:48)(cid:38) o(cid:50)(cid:39)ra(cid:54)(cid:39) (cid:27)(cid:33) (cid:53)o(cid:46)ar (cid:50)o(cid:57)(cid:39)r (cid:53)y(cid:53)(cid:54)(cid:39)m(cid:53) (cid:43)(cid:48) a (cid:54)(cid:43)m(cid:39)(cid:46)y a(cid:48)(cid:38) (cid:37)o(cid:53)(cid:54) (cid:39)(cid:40)(cid:40)(cid:39)(cid:37)(cid:54)(cid:43)(cid:56)(cid:39) ma(cid:48)(cid:48)(cid:39)r(cid:5) a(cid:48)(cid:38) r(cid:39)(cid:41)u(cid:46)a(cid:54)ory a(cid:41)(cid:39)(cid:48)(cid:37)(cid:43)(cid:39)(cid:53)(cid:5) (cid:46)o(cid:37)a(cid:46) (cid:37)ommu(cid:48)(cid:43)(cid:54)(cid:43)(cid:39)(cid:53)(cid:5) (cid:46)a(cid:36)or u(cid:48)(cid:43)o(cid:48)(cid:53)(cid:5) (cid:54)r(cid:43)(cid:36)(cid:39)(cid:53)(cid:5) or o(cid:54)(cid:42)(cid:39)r (cid:54)(cid:42)(cid:43)r(cid:38) (cid:50)ar(cid:54)(cid:43)(cid:39)(cid:53) may (cid:38)(cid:39)(cid:46)ay(cid:5) (cid:50)r(cid:39)(cid:56)(cid:39)(cid:48)(cid:54)(cid:5) or (cid:43)(cid:48)(cid:37)r(cid:39)a(cid:53)(cid:39) (cid:54)(cid:42)(cid:39) (cid:37)o(cid:53)(cid:54) o(cid:40) (cid:37)o(cid:48)(cid:53)(cid:54)ru(cid:37)(cid:54)(cid:43)o(cid:48) a(cid:48)(cid:38) o(cid:50)(cid:39)ra(cid:54)(cid:43)o(cid:48) o(cid:40) (cid:54)(cid:42)(cid:39) (cid:53)y(cid:53)(cid:54)(cid:39)m (cid:57)(cid:39) (cid:43)(cid:48)(cid:54)(cid:39)(cid:48)(cid:38) (cid:54)o (cid:36)u(cid:43)(cid:46)(cid:38)(cid:7) In order to construct and operate our P(cid:48) solar power systems, we need to acquire or lease land and rights of way, obtain interconnection rights, negotiate agreements with affected transmission systems, and obtain all necessary federal, state, county, local, and foreign approvals, licenses, and permits, as well as rights to interconnect the systems to the transmission grid and transmit energy generated from the system. We may be unable to acquire the land or lease interests needed, may not obtain or maintain satisfactory interconnection rights, may have difficulty reaching agreements with affected transmission systems and/or incur unexpected network upgrade costs, may not receive or retain the requisite approvals, permits, licenses, and interconnection and transmission rights, or may encounter other problems that could delay or prevent us from successfully constructing and operating such systems. Many of our proposed pro(cid:61)ects are located on or require access through public lands administered by federal and state agencies pursuant to competitive public leasing and right(cid:12)of(cid:12)way procedures and processes. Our pro(cid:61)ects may also be located on tribal land pursuant to land agreements that must be approved by tribal governments and federal agencies. The authorization for the use, construction, and operation of systems and associated transmission facilities on federal, state, tribal, and private lands will also require the assessment and evaluation of mineral rights, private rights(cid:12)of(cid:12)way, and other easements(cid:26) environmental, agricultural, cultural, recreational, and aesthetic impacts(cid:26) and the likely mitigation of adverse impacts to these and other resources and uses. The inability to obtain the required permits and other federal, state, local, and tribal approvals, and any excessive delays in obtaining such permits and approvals due, for example, to litigation or third(cid:12)party appeals, could potentially prevent us from successfully constructing and operating such systems in a timely manner and could result in the potential forfeiture of any deposit we have made with respect to a given pro(cid:61)ect. Moreover, pro(cid:61)ect approvals sub(cid:61)ect to pro(cid:61)ect modifications and conditions, including mitigation requirements and costs, could affect the financial success of a given pro(cid:61)ect. Changing regulatory requirements and the discovery of unknown site conditions could also affect the financial success of a given pro(cid:61)ect. In addition, local labor unions may increase the cost of pro(cid:61)ect development in California and elsewhere. We may also be sub(cid:61)ect to labor unavailability and/or increased union labor requirements due to multiple simultaneous pro(cid:61)ects in a geographic region. 3(cid:21) (cid:34)(cid:39) may (cid:48)o(cid:54) (cid:36)(cid:39) a(cid:36)(cid:46)(cid:39) (cid:54)o o(cid:36)(cid:54)a(cid:43)(cid:48) (cid:46)o(cid:48)(cid:41)-(cid:54)(cid:39)rm (cid:37)o(cid:48)(cid:54)ra(cid:37)(cid:54)(cid:53) (cid:40)or (cid:54)(cid:42)(cid:39) (cid:53)a(cid:46)(cid:39) o(cid:40) (cid:50)o(cid:57)(cid:39)r (cid:50)ro(cid:38)u(cid:37)(cid:39)(cid:38) (cid:36)y our (cid:50)ro(cid:44)(cid:39)(cid:37)(cid:54)(cid:53) a(cid:54) (cid:50)r(cid:43)(cid:37)(cid:39)(cid:53) a(cid:48)(cid:38) o(cid:48) o(cid:54)(cid:42)(cid:39)r (cid:54)(cid:39)rm(cid:53) (cid:40)a(cid:56)ora(cid:36)(cid:46)(cid:39) (cid:54)o a(cid:54)(cid:54)ra(cid:37)(cid:54) (cid:40)(cid:43)(cid:48)a(cid:48)(cid:37)(cid:43)(cid:48)(cid:41) a(cid:48)(cid:38) o(cid:54)(cid:42)(cid:39)r (cid:43)(cid:48)(cid:56)(cid:39)(cid:53)(cid:54)m(cid:39)(cid:48)(cid:54)(cid:53)(cid:22) (cid:57)(cid:43)(cid:54)(cid:42) r(cid:39)(cid:41)ar(cid:38) (cid:54)o (cid:50)ro(cid:44)(cid:39)(cid:37)(cid:54)(cid:53) (cid:40)or (cid:57)(cid:42)(cid:43)(cid:37)(cid:42) (cid:39)(cid:46)(cid:39)(cid:37)(cid:54)r(cid:43)(cid:37)(cid:43)(cid:54)y (cid:43)(cid:53) or (cid:57)(cid:43)(cid:46)(cid:46) (cid:36)(cid:39) (cid:53)o(cid:46)(cid:38) o(cid:48) a(cid:48) o(cid:50)(cid:39)(cid:48) (cid:37)o(cid:48)(cid:54)ra(cid:37)(cid:54) (cid:36)a(cid:53)(cid:43)(cid:53) ra(cid:54)(cid:42)(cid:39)r (cid:54)(cid:42)a(cid:48) u(cid:48)(cid:38)(cid:39)r a (cid:27)(cid:27)(cid:13)(cid:5) our r(cid:39)(cid:53)u(cid:46)(cid:54)(cid:53) o(cid:40) o(cid:50)(cid:39)ra(cid:54)(cid:43)o(cid:48)(cid:53) (cid:37)ou(cid:46)(cid:38) (cid:36)(cid:39) a(cid:38)(cid:56)(cid:39)r(cid:53)(cid:39)(cid:46)y a(cid:40)(cid:40)(cid:39)(cid:37)(cid:54)(cid:39)(cid:38) (cid:54)o (cid:54)(cid:42)(cid:39) (cid:39)(cid:58)(cid:54)(cid:39)(cid:48)(cid:54) (cid:50)r(cid:39)(cid:56)a(cid:43)(cid:46)(cid:43)(cid:48)(cid:41) (cid:53)(cid:50)o(cid:54) (cid:39)(cid:46)(cid:39)(cid:37)(cid:54)r(cid:43)(cid:37)(cid:43)(cid:54)y (cid:50)r(cid:43)(cid:37)(cid:39)(cid:53) (cid:38)(cid:39)(cid:37)(cid:46)(cid:43)(cid:48)(cid:39) (cid:43)(cid:48) a(cid:48) u(cid:48)(cid:39)(cid:58)(cid:50)(cid:39)(cid:37)(cid:54)(cid:39)(cid:38) ma(cid:48)(cid:48)(cid:39)r(cid:7) Obtaining long(cid:12)term contracts for the sale of power produced by our pro(cid:61)ects at prices and on other terms favorable to us is essential for obtaining financing and commencing construction of our pro(cid:61)ects. We must compete for PPAs against other developers of solar and renewable energy pro(cid:61)ects. This intense competition for PPAs has resulted in downward pressure on PPA pricing for newly contracted pro(cid:61)ects. In addition, we believe the solar industry may experience periods of structural imbalance between supply and demand that put downward pressure on module pricing. This downward pressure on module pricing also creates downward pressure on PPA pricing for newly contracted pro(cid:61)ects. See the Risk Factor entitled (cid:87)Competition at the system level can be intense, thereby potentially exerting downward pressure on system(cid:12)level profit margins industry(cid:12)wide, which could reduce our profitability and adversely affect our results of operations(cid:88) for additional information. If falling PPA pricing results in forecasted pro(cid:61)ect revenue that is insufficient to generate returns anticipated to be demanded in the pro(cid:61)ect sale market, our business, financial condition, and results of operations could be adversely affected. Other sources of power, such as natural gas(cid:12)fired power plants, have historically been cheaper than the cost of solar power, and certain types of generation pro(cid:61)ects, such as natural gas(cid:12)fired power plants, can deliver power on a firm basis. The inability to compete successfully against other power producers or otherwise enter into PPAs favorable to us would negatively affect our ability to develop and finance our pro(cid:61)ects and negatively impact our revenue. In addition, the availability of PPAs is dependent on utility and corporate energy procurement practices that could evolve and shift allocation of market risks over time. In addition, PPA availability and terms are a function of a number of economic, regulatory, tax, and public policy factors, which are also sub(cid:61)ect to change. Furthermore, certain of our pro(cid:61)ects may be scheduled for substantial completion prior to the commencement of a long(cid:12)term PPA with a ma(cid:61)or off(cid:12)taker, in which case we would be required to enter into a stub(cid:12)period PPA for the intervening time period or sell down the pro(cid:61)ect. We may not be able to do either on terms that are commercially attractive to us. Finally, the electricity from certain of our pro(cid:61)ects is or is expected to be sold on an open contract basis for a period of time rather than under a PPA. If prevailing spot electricity prices relating to any such pro(cid:61)ect were to decline in an unexpected manner, such pro(cid:61)ect may decline in value and our results of operations could otherwise be adversely affected. Even if we are able to obtain PPAs favorable to us, the ability of our off(cid:12)take counterparties to fulfill their contractual obligations to us depends, in part, on their creditworthiness. These counterparties, such as our investor(cid:12) owned utility counterparties in the state of California, which may have liability for damages associated with California(cid:89)s recent wildfires, could suffer a deterioration of their creditworthiness or become, and in one case has become, sub(cid:61)ect to bankruptcy, insolvency, or liquidation proceedings or otherwise. For example, in January 2019, PG(cid:6)E Corporation and Pacific Gas and Electric Company filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code in the U.S. Bankruptcy Court for the Northern District of California. If one or more of our counterparties becomes sub(cid:61)ect to bankruptcy, insolvency, or liquidation proceedings, or if the creditworthiness of any counterparty deteriorates, we could experience an underpayment or nonpayment under PPA agreements and our ability to attract debt or equity financing for our pro(cid:61)ects could be impaired. (cid:23)a(cid:37)(cid:45) o(cid:40) (cid:54)ra(cid:48)(cid:53)m(cid:43)(cid:53)(cid:53)(cid:43)o(cid:48) (cid:37)a(cid:50)a(cid:37)(cid:43)(cid:54)y a(cid:56)a(cid:43)(cid:46)a(cid:36)(cid:43)(cid:46)(cid:43)(cid:54)y(cid:5) (cid:50)o(cid:54)(cid:39)(cid:48)(cid:54)(cid:43)a(cid:46) u(cid:50)(cid:41)ra(cid:38)(cid:39) (cid:37)o(cid:53)(cid:54)(cid:53) (cid:54)o (cid:54)(cid:42)(cid:39) (cid:54)ra(cid:48)(cid:53)m(cid:43)(cid:53)(cid:53)(cid:43)o(cid:48) (cid:41)r(cid:43)(cid:38)(cid:5) a(cid:48)(cid:38) o(cid:54)(cid:42)(cid:39)r (cid:53)y(cid:53)(cid:54)(cid:39)m (cid:37)o(cid:48)(cid:53)(cid:54)ra(cid:43)(cid:48)(cid:54)(cid:53) (cid:37)ou(cid:46)(cid:38) (cid:53)(cid:43)(cid:41)(cid:48)(cid:43)(cid:40)(cid:43)(cid:37)a(cid:48)(cid:54)(cid:46)y (cid:43)m(cid:50)a(cid:37)(cid:54) our a(cid:36)(cid:43)(cid:46)(cid:43)(cid:54)y (cid:54)o (cid:36)u(cid:43)(cid:46)(cid:38) (cid:27)(cid:33) (cid:53)o(cid:46)ar (cid:50)o(cid:57)(cid:39)r (cid:53)y(cid:53)(cid:54)(cid:39)m(cid:53) a(cid:48)(cid:38) (cid:41)(cid:39)(cid:48)(cid:39)ra(cid:54)(cid:39) (cid:53)o(cid:46)ar (cid:39)(cid:46)(cid:39)(cid:37)(cid:54)r(cid:43)(cid:37)(cid:43)(cid:54)y (cid:50)o(cid:57)(cid:39)r (cid:53)a(cid:46)(cid:39)(cid:53)(cid:7) In order to deliver electricity from our P(cid:48) solar power systems to our customers, our pro(cid:61)ects generally need to connect to the transmission grid. The lack of available capacity on the transmission grid could substantially impact our pro(cid:61)ects and cause reductions in pro(cid:61)ect size, delays in pro(cid:61)ect implementation, increases in costs from transmission upgrades, and potential forfeitures of any deposit we have made with respect to a given pro(cid:61)ect. In addition, there could be unexpected costs required to complete transmission and network upgrades that adversely 3(cid:22) impact the economic viability of our P(cid:48) solar power systems. These transmission and network issues and costs, as well as issues relating to the availability of large equipment such as transformers and switchgear, could significantly impact our ability to interconnect our systems to the transmission grid, build such systems, and generate solar electricity sales. (cid:15)om(cid:50)(cid:39)(cid:54)(cid:43)(cid:54)(cid:43)o(cid:48) a(cid:54) (cid:54)(cid:42)(cid:39) (cid:53)y(cid:53)(cid:54)(cid:39)m (cid:46)(cid:39)(cid:56)(cid:39)(cid:46) (cid:37)a(cid:48) (cid:36)(cid:39) (cid:43)(cid:48)(cid:54)(cid:39)(cid:48)(cid:53)(cid:39)(cid:5) (cid:54)(cid:42)(cid:39)r(cid:39)(cid:36)y (cid:50)o(cid:54)(cid:39)(cid:48)(cid:54)(cid:43)a(cid:46)(cid:46)y (cid:39)(cid:58)(cid:39)r(cid:54)(cid:43)(cid:48)(cid:41) (cid:38)o(cid:57)(cid:48)(cid:57)ar(cid:38) (cid:50)r(cid:39)(cid:53)(cid:53)ur(cid:39) o(cid:48) (cid:53)y(cid:53)(cid:54)(cid:39)m-(cid:46)(cid:39)(cid:56)(cid:39)(cid:46) (cid:50)ro(cid:40)(cid:43)(cid:54) mar(cid:41)(cid:43)(cid:48)(cid:53) (cid:43)(cid:48)(cid:38)u(cid:53)(cid:54)ry-(cid:57)(cid:43)(cid:38)(cid:39)(cid:5) (cid:57)(cid:42)(cid:43)(cid:37)(cid:42) (cid:37)ou(cid:46)(cid:38) r(cid:39)(cid:38)u(cid:37)(cid:39) our (cid:50)ro(cid:40)(cid:43)(cid:54)a(cid:36)(cid:43)(cid:46)(cid:43)(cid:54)y a(cid:48)(cid:38) a(cid:38)(cid:56)(cid:39)r(cid:53)(cid:39)(cid:46)y a(cid:40)(cid:40)(cid:39)(cid:37)(cid:54) our r(cid:39)(cid:53)u(cid:46)(cid:54)(cid:53) o(cid:40) o(cid:50)(cid:39)ra(cid:54)(cid:43)o(cid:48)(cid:53)(cid:7) The significant decline in P(cid:48) solar module prices over the last several years continues to create a challenging environment for module manufacturers, but it has also helped drive demand for solar electricity worldwide. Aided by such lower module prices, our customers and potential customers have in many cases been willing and able to bid aggressively for new pro(cid:61)ects and PPAs, using low cost assumptions for modules, BoS parts, installation, maintenance, and other costs as the basis for such bids. Relatively low barriers to entry for solar pro(cid:61)ect developers, including those we compete with, have led to, depending on the market and other factors, intense competition at the system level, which may result in an environment in which system(cid:12)level pricing falls rapidly, thereby further increasing demand for solar energy solutions but constraining the ability for pro(cid:61)ect developers, and diversified companies such as First Solar to sustain meaningful and consistent profitability. Accordingly, while we believe our system offerings and experience are positively differentiated in many cases from that of our competitors, we may fail to correctly identify our competitive position, we may be unable to develop or maintain a sufficient magnitude of new system pro(cid:61)ects at economically attractive rates of return, and we may not otherwise be able to achieve meaningful profitability under our long(cid:12)term strategic plans. Depending on the market opportunity, we may be at a disadvantage compared to potential system(cid:12)level competitors. For example, certain of our competitors may have a stronger and/or more established localized business presence in a particular geographic region. Certain of our competitors may be larger entities that have greater financial resources and greater overall brand name recognition than we do and, as a result, may be better positioned to impact customer behavior or adapt to changes in the industry or the economy as a whole. Certain competitors may also have direct or indirect access to sovereign capital and/or other incentives, which could enable such competitors to operate at minimal or negative operating margins for sustained periods of time. Additionally, depending on the geographic area, certain potential customers may still be in the process of educating themselves about the points of differentiation among various available providers of P(cid:48) solar energy solutions, including a company(cid:89)s proven overall experience and bankability, system design and optimization expertise, grid interconnection and stabilization expertise, and proven O(cid:6)M capabilities. If we are unable over time to meaningfully differentiate our offerings at scale, or if available competitive pricing is prioritized over the value we believe is added through our system offerings and experience, from the viewpoint of our potential customer base, our business, financial condition, and results of operations could be adversely affected. Following an evaluation of the long(cid:12)term cost structure, competitiveness, and risk(cid:12)ad(cid:61)usted returns of our O(cid:6)M services business, we received an offer to purchase certain portions of the business and determined it is in the best interest of our stockholders to pursue this transaction. As a result, in August 2020 we entered into an agreement with Clairvest for the sale of our North American O(cid:6)M operations. The completion of the transaction is contingent on a number of closing conditions, including the receipt of certain third(cid:12)party consents and other customary closing conditions. Assuming satisfaction of such closing conditions, we expect the sale to be completed in the first half of 2021. Following an evaluation of the long(cid:12)term cost structure, competitiveness, and risk(cid:12)ad(cid:61)usted returns of our U.S. pro(cid:61)ect development business, we have determined it is in the best interest of our stockholders to pursue the sale of this business. On January 24, 2021, we entered into an agreement with OMERS for the sale of our U.S. pro(cid:61)ect development operations, which comprises the business of developing, contracting for the construction of, and selling utility(cid:12)scale P(cid:48) solar power systems. The transaction includes our approximately 10 GWAC utility(cid:12)scale solar pro(cid:61)ect pipeline, including the advanced(cid:12)stage Horizon, Madison, Ridgely, Rabbitbrush, and Oak Trail pro(cid:61)ects that are 3(cid:23) expected to commence construction in the next two years(cid:26) the 30 MWAC Barilla Solar pro(cid:61)ect, which is operational(cid:26) and certain other equipment. In addition, OMERS has agreed to certain module purchase commitments. The completion of the transaction is contingent on a number of closing conditions, including the receipt of regulatory approval from FERC, the expiration of the mandatory waiting period under U.S. antitrust laws, a review of the transaction by CFIUS, and other customary closing conditions. Assuming satisfaction of such closing conditions, we expect the sale to be completed in the first half of 2021. (cid:26)ur (cid:53)y(cid:53)(cid:54)(cid:39)m(cid:53) (cid:36)u(cid:53)(cid:43)(cid:48)(cid:39)(cid:53)(cid:53) (cid:43)(cid:53) (cid:46)ar(cid:41)(cid:39)(cid:46)y (cid:38)(cid:39)(cid:50)(cid:39)(cid:48)(cid:38)(cid:39)(cid:48)(cid:54) o(cid:48) u(cid:53) a(cid:48)(cid:38) (cid:54)(cid:42)(cid:43)r(cid:38) (cid:50)ar(cid:54)(cid:43)(cid:39)(cid:53) arra(cid:48)(cid:41)(cid:43)(cid:48)(cid:41) (cid:40)(cid:43)(cid:48)a(cid:48)(cid:37)(cid:43)(cid:48)(cid:41) (cid:40)rom (cid:56)ar(cid:43)ou(cid:53) (cid:53)our(cid:37)(cid:39)(cid:53)(cid:5) (cid:57)(cid:42)(cid:43)(cid:37)(cid:42) may (cid:48)o(cid:54) (cid:36)(cid:39) a(cid:56)a(cid:43)(cid:46)a(cid:36)(cid:46)(cid:39) or may o(cid:48)(cid:46)y (cid:36)(cid:39) a(cid:56)a(cid:43)(cid:46)a(cid:36)(cid:46)(cid:39) o(cid:48) u(cid:48)(cid:40)a(cid:56)ora(cid:36)(cid:46)(cid:39) (cid:54)(cid:39)rm(cid:53) or (cid:43)(cid:48) (cid:43)(cid:48)(cid:53)u(cid:40)(cid:40)(cid:43)(cid:37)(cid:43)(cid:39)(cid:48)(cid:54) amou(cid:48)(cid:54)(cid:53)(cid:7) The construction of large utility(cid:12)scale solar power pro(cid:61)ects in many cases requires pro(cid:61)ect financing, including non(cid:12) recourse pro(cid:61)ect specific debt financing in the bank loan market and institutional debt capital markets. Uncertainties exist as to whether our planned pro(cid:61)ects will be able to access the debt markets in a magnitude sufficient to finance their construction. If we, or purchasers of our pro(cid:61)ects, are unable to arrange such financing or if it is only available on unfavorable terms, we may be unable to fully execute our systems business plans. In addition, we generally expect to sell interests in our pro(cid:61)ects by raising pro(cid:61)ect equity capital from tax(cid:12)oriented, strategic industry, and other equity investors. Such equity sources may not be available or may only be available in insufficient amounts or on unfavorable terms, in which case our ability to sell interests in our pro(cid:61)ects may be delayed or limited, and our business, financial condition, and results of operations may be adversely affected. Uncertainty in or adverse changes to tax policy or tax law, including the amount of ITC or accelerated depreciation, and any limitations on the value or availability to potential investors of tax incentives that benefit solar energy pro(cid:61)ects such as the ITC and accelerated depreciation deductions, as well as the reduction of the U.S. corporate income tax rate to 21(cid:5) under the Tax Cuts and Jobs Act (the (cid:87)Tax Act(cid:88)) (which could reduce the value of these tax related incentives) may reduce pro(cid:61)ect values or negatively affect our ability to timely secure equity investment for our pro(cid:61)ects. Depending on prevailing conditions in the credit markets, interest rates and other factors, such financing may not be available or may only be available on unfavorable terms or in insufficient amounts. If third parties are limited in their ability to access financing to support their purchase of system construction services from us, we may not realize the cash flows that we expect from such sales, which could adversely affect our ability to invest in our business and/or generate revenue. See also the Risk Factor above entitled (cid:87)An increase in interest rates or tightening of the supply of capital in the global financial markets (including a reduction in total tax equity availability) could make it difficult for customers to finance the cost of a P(cid:48) solar power system and could reduce the demand for our modules or systems and/or lead to a reduction in the average selling price for such offerings.(cid:88) (cid:16)(cid:39)(cid:56)(cid:39)(cid:46)o(cid:50)(cid:43)(cid:48)(cid:41) (cid:53)o(cid:46)ar (cid:50)o(cid:57)(cid:39)r (cid:50)ro(cid:44)(cid:39)(cid:37)(cid:54)(cid:53) may r(cid:39)(cid:51)u(cid:43)r(cid:39) (cid:53)(cid:43)(cid:41)(cid:48)(cid:43)(cid:40)(cid:43)(cid:37)a(cid:48)(cid:54) u(cid:50)(cid:40)ro(cid:48)(cid:54) (cid:43)(cid:48)(cid:56)(cid:39)(cid:53)(cid:54)m(cid:39)(cid:48)(cid:54) (cid:50)r(cid:43)or (cid:54)o (cid:54)(cid:42)(cid:39) (cid:53)(cid:43)(cid:41)(cid:48)(cid:43)(cid:48)(cid:41) o(cid:40) (cid:53)a(cid:46)(cid:39)(cid:53) (cid:37)o(cid:48)(cid:54)ra(cid:37)(cid:54)(cid:53)(cid:5) (cid:57)(cid:42)(cid:43)(cid:37)(cid:42) (cid:37)ou(cid:46)(cid:38) a(cid:38)(cid:56)(cid:39)r(cid:53)(cid:39)(cid:46)y a(cid:40)(cid:40)(cid:39)(cid:37)(cid:54) our (cid:36)u(cid:53)(cid:43)(cid:48)(cid:39)(cid:53)(cid:53) a(cid:48)(cid:38) r(cid:39)(cid:53)u(cid:46)(cid:54)(cid:53) o(cid:40) o(cid:50)(cid:39)ra(cid:54)(cid:43)o(cid:48)(cid:53)(cid:7) Solar power pro(cid:61)ect development cycles, which span the time between the identification of a site location and the construction of a system, vary substantially and can take years to mature. As a result of these long pro(cid:61)ect development cycles, we may need to make significant up(cid:12)front investments of resources (including, for example, payments for land rights, large transmission and PPA deposits, or other payments, which may be non(cid:12)refundable) in advance of the signing of sales contracts, receiving cash proceeds, or recognizing any revenue. Our potential inability to enter into sales contracts with customers on favorable terms after making such upfront investments could cause us to forfeit certain nonrefundable payments or otherwise adversely affect our business and results of operations. Furthermore, we may become constrained in our ability to simultaneously fund our other business operations and these systems investments through our long pro(cid:61)ect development cycles. Our liquidity may also be adversely affected to the extent the pro(cid:61)ect sales market weakens and we are unable to sell interests in our solar pro(cid:61)ects on pricing, timing, and other terms commercially acceptable to us. In such a scenario, we may choose to continue to temporarily own and operate certain solar pro(cid:61)ects for a period of time, after which interests in the pro(cid:61)ects may be sold to third parties. 39 (cid:34)(cid:39) may (cid:36)(cid:39) (cid:53)u(cid:36)(cid:44)(cid:39)(cid:37)(cid:54) (cid:54)o u(cid:48)(cid:40)or(cid:39)(cid:53)(cid:39)(cid:39)(cid:48) (cid:37)o(cid:53)(cid:54)(cid:53)(cid:5) (cid:46)(cid:43)a(cid:36)(cid:43)(cid:46)(cid:43)(cid:54)(cid:43)(cid:39)(cid:53)(cid:5) or o(cid:36)(cid:46)(cid:43)(cid:41)a(cid:54)(cid:43)o(cid:48)(cid:53) (cid:57)(cid:42)(cid:39)(cid:48) (cid:50)ro(cid:56)(cid:43)(cid:38)(cid:43)(cid:48)(cid:41) (cid:26)(cid:2)(cid:24) (cid:53)(cid:39)r(cid:56)(cid:43)(cid:37)(cid:39)(cid:53)(cid:7) (cid:20)(cid:48) a(cid:38)(cid:38)(cid:43)(cid:54)(cid:43)o(cid:48)(cid:5) (cid:37)(cid:39)r(cid:54)a(cid:43)(cid:48) o(cid:40) our (cid:26)(cid:2)(cid:24) a(cid:41)r(cid:39)(cid:39)m(cid:39)(cid:48)(cid:54)(cid:53) (cid:43)(cid:48)(cid:37)(cid:46)u(cid:38)(cid:39) (cid:50)ro(cid:56)(cid:43)(cid:53)(cid:43)o(cid:48)(cid:53) (cid:50)(cid:39)rm(cid:43)(cid:54)(cid:54)(cid:43)(cid:48)(cid:41) (cid:54)(cid:42)(cid:39) (cid:37)ou(cid:48)(cid:54)(cid:39)r(cid:50)ar(cid:54)y (cid:54)o (cid:54)(cid:39)rm(cid:43)(cid:48)a(cid:54)(cid:39) (cid:54)(cid:42)(cid:39) a(cid:41)r(cid:39)(cid:39)m(cid:39)(cid:48)(cid:54) (cid:57)(cid:43)(cid:54)(cid:42)ou(cid:54) (cid:37)au(cid:53)(cid:39)(cid:7) We may provide ongoing O(cid:6)M services to system owners under separate service agreements, pursuant to which we generally perform standard activities associated with operating a P(cid:48) solar power system, including 24/(cid:22) monitoring and control, compliance activities, energy forecasting, and scheduled and unscheduled maintenance. Our costs to perform these services are estimated at the time of entering into the O(cid:6)M agreement for a particular pro(cid:61)ect, and these are reflected in the price we charge our customers, including certain agreements which feature fixed pricing. Should our estimates of O(cid:6)M costs prove inaccurate (including any unexpected serial defects, unavailability of parts, or increases in inflation, labor, or BoS costs), our growth strategy and results of operations could be adversely affected. Because of the potentially long(cid:12)term nature of these O(cid:6)M agreements, the adverse impacts on our results of operations could be significant, up to our limitation of liability capped under the terms of the agreements. In addition, certain of our O(cid:6)M agreements include provisions permitting the counterparty to terminate the agreement without cause or for convenience. The exercise of such termination rights, or the use of such rights as leverage to re(cid:12)negotiate terms and conditions of an O(cid:6)M agreement, including pricing terms, could adversely impact our results of operations. We may also be sub(cid:61)ect to substantial costs in the event we do not achieve certain thresholds under the effective availability guarantees included in our O(cid:6)M agreements. Following an evaluation of the long(cid:12)term cost structure, competitiveness, and risk(cid:12)ad(cid:61)usted returns of our O(cid:6)M services business, we received an offer to purchase certain portions of the business and determined it is in the best interest of our stockholders to pursue this transaction. As a result, in August 2020 we entered into an agreement with Clairvest for the sale of our North American O(cid:6)M operations. The completion of the transaction is contingent on a number of closing conditions, including the receipt of certain third(cid:12)party consents and other customary closing conditions. Assuming satisfaction of such closing conditions, we expect the sale to be completed in the first half of 2021. (cid:26)ur (cid:53)y(cid:53)(cid:54)(cid:39)m(cid:53) (cid:36)u(cid:53)(cid:43)(cid:48)(cid:39)(cid:53)(cid:53) (cid:43)(cid:53) (cid:53)u(cid:36)(cid:44)(cid:39)(cid:37)(cid:54) (cid:54)o r(cid:39)(cid:41)u(cid:46)a(cid:54)ory o(cid:56)(cid:39)r(cid:53)(cid:43)(cid:41)(cid:42)(cid:54) a(cid:48)(cid:38) (cid:46)(cid:43)a(cid:36)(cid:43)(cid:46)(cid:43)(cid:54)y (cid:43)(cid:40) (cid:57)(cid:39) (cid:40)a(cid:43)(cid:46) (cid:54)o o(cid:50)(cid:39)ra(cid:54)(cid:39) (cid:27)(cid:33) (cid:53)o(cid:46)ar (cid:50)o(cid:57)(cid:39)r (cid:53)y(cid:53)(cid:54)(cid:39)m(cid:53) (cid:43)(cid:48) (cid:37)om(cid:50)(cid:46)(cid:43)a(cid:48)(cid:37)(cid:39) (cid:57)(cid:43)(cid:54)(cid:42) (cid:39)(cid:46)(cid:39)(cid:37)(cid:54)r(cid:43)(cid:37) r(cid:39)(cid:46)(cid:43)a(cid:36)(cid:43)(cid:46)(cid:43)(cid:54)y ru(cid:46)(cid:39)(cid:53)(cid:7) The ongoing O(cid:6)M services that we provide for system owners may sub(cid:61)ect us to regulation by the North American Electric Reliability Corporation ((cid:87)NERC(cid:88)), or its designated regional representative, as a generator operator ((cid:87)GOP(cid:88)) under electric reliability rules filed with FERC. Our failure to comply with the reliability rules applicable to GOPs could sub(cid:61)ect us to substantial fines by NERC, sub(cid:61)ect to FERC(cid:89)s review. In addition, the system owners that receive our O(cid:6)M services may be regulated by NERC as generator owners ((cid:87)GO(cid:88)) and we may incur liability for GO violations and fines levied by NERC, sub(cid:61)ect to FERC(cid:89)s review, based on the terms of our O(cid:6)M agreements. As a system owner and operator, we may in the future be sub(cid:61)ect to regulation by NERC as a GO. 40 Ri(cid:66)(cid:58)(cid:66) Relate(cid:51) t(cid:62) Regulati(cid:62)n(cid:66) (cid:17)(cid:58)(cid:43)(cid:53)(cid:54)(cid:43)(cid:48)(cid:41) r(cid:39)(cid:41)u(cid:46)a(cid:54)(cid:43)o(cid:48)(cid:53) a(cid:48)(cid:38) (cid:50)o(cid:46)(cid:43)(cid:37)(cid:43)(cid:39)(cid:53)(cid:5) (cid:37)(cid:42)a(cid:48)(cid:41)(cid:39)(cid:53) (cid:54)(cid:42)(cid:39)r(cid:39)(cid:54)o(cid:5) a(cid:48)(cid:38) (cid:48)(cid:39)(cid:57) r(cid:39)(cid:41)u(cid:46)a(cid:54)(cid:43)o(cid:48)(cid:53) a(cid:48)(cid:38) (cid:50)o(cid:46)(cid:43)(cid:37)(cid:43)(cid:39)(cid:53) may (cid:50)r(cid:39)(cid:53)(cid:39)(cid:48)(cid:54) (cid:54)(cid:39)(cid:37)(cid:42)(cid:48)(cid:43)(cid:37)a(cid:46)(cid:5) r(cid:39)(cid:41)u(cid:46)a(cid:54)ory(cid:5) a(cid:48)(cid:38) (cid:39)(cid:37)o(cid:48)om(cid:43)(cid:37) (cid:36)arr(cid:43)(cid:39)r(cid:53) (cid:54)o (cid:54)(cid:42)(cid:39) (cid:50)ur(cid:37)(cid:42)a(cid:53)(cid:39) a(cid:48)(cid:38) u(cid:53)(cid:39) o(cid:40) (cid:27)(cid:33) (cid:53)o(cid:46)ar (cid:50)ro(cid:38)u(cid:37)(cid:54)(cid:53) or (cid:53)y(cid:53)(cid:54)(cid:39)m(cid:53)(cid:5) (cid:57)(cid:42)(cid:43)(cid:37)(cid:42) may (cid:53)(cid:43)(cid:41)(cid:48)(cid:43)(cid:40)(cid:43)(cid:37)a(cid:48)(cid:54)(cid:46)y r(cid:39)(cid:38)u(cid:37)(cid:39) (cid:38)(cid:39)ma(cid:48)(cid:38) (cid:40)or our mo(cid:38)u(cid:46)(cid:39)(cid:53)(cid:5) (cid:53)y(cid:53)(cid:54)(cid:39)m(cid:53)(cid:5) or (cid:53)(cid:39)r(cid:56)(cid:43)(cid:37)(cid:39)(cid:53)(cid:7) The market for electricity generation products is heavily influenced by federal, state, local, and foreign government regulations and policies concerning the electric utility industry, as well as policies promulgated by electric utilities. These regulations and policies often relate to electricity pricing and interconnection of customer(cid:12)owned electricity generation. In the United States and in a number of other countries, these regulations and policies have been modified in the past and may be modified again in the future. These regulations and policies could deter end(cid:12)user purchases of P(cid:48) solar products or systems and investment in the R(cid:6)D of P(cid:48) solar technology. For example, without a mandated regulatory exception for P(cid:48) solar power systems, system owners are often charged interconnection or standby fees for putting distributed power generation on the electric utility grid. To the extent these interconnection standby fees are applicable to P(cid:48) solar power systems, it is likely that they would increase the cost of such systems, which could make the systems less desirable, thereby adversely affecting our business, financial condition, and results of operations. In addition, with respect to utilities that utilize a peak(cid:12)hour pricing policy or time(cid:12)of(cid:12)use pricing methods whereby the price of electricity is ad(cid:61)usted based on electricity supply and demand, electricity generated by P(cid:48) solar power systems currently benefits from competing primarily with expensive peak(cid:12)hour electricity, rather than the less expensive average price of electricity. Modifications to the peak(cid:12)hour pricing policies of utilities, such as to a flat rate for all times of the day, would require P(cid:48) solar power systems to have lower prices in order to compete with the price of electricity from other sources, which could adversely impact our operating results. Our modules, systems, and services are often sub(cid:61)ect to oversight and regulation in accordance with national and local ordinances relating to building codes, safety, environmental protection, utility interconnection and metering, and other matters, and tracking the requirements of individual (cid:61)urisdictions is complex. Any new government regulations or utility policies pertaining to our modules, systems, or services may result in significant additional expenses to us or our customers and, as a result, could cause a significant reduction in demand for our modules, systems, or services. In addition, any regulatory compliance failure could result in significant management distraction, unplanned costs, and/or reputational damage. (cid:34)(cid:39) (cid:37)ou(cid:46)(cid:38) (cid:36)(cid:39) a(cid:38)(cid:56)(cid:39)r(cid:53)(cid:39)(cid:46)y a(cid:40)(cid:40)(cid:39)(cid:37)(cid:54)(cid:39)(cid:38) (cid:36)y a(cid:48)y (cid:56)(cid:43)o(cid:46)a(cid:54)(cid:43)o(cid:48)(cid:53) o(cid:40) (cid:54)(cid:42)(cid:39) F(cid:15)(cid:27)(cid:13)(cid:5) (cid:54)(cid:42)(cid:39) (cid:32)(cid:7)K(cid:7) (cid:14)r(cid:43)(cid:36)(cid:39)ry (cid:13)(cid:37)(cid:54)(cid:5) a(cid:48)(cid:38) o(cid:54)(cid:42)(cid:39)r (cid:40)or(cid:39)(cid:43)(cid:41)(cid:48) a(cid:48)(cid:54)(cid:43)- (cid:36)r(cid:43)(cid:36)(cid:39)ry (cid:46)a(cid:57)(cid:53). The FCPA generally prohibits companies and their intermediaries from making improper payments to non(cid:12)U.S. government officials for the purpose of obtaining or retaining business. Other countries in which we operate also have anti(cid:12)bribery laws, some of which prohibit improper payments to government and non(cid:12)government persons and entities, and others (e.g., the FCPA and the U.K. Bribery Act) extend their application to activities outside their country of origin. Our policies mandate compliance with all applicable anti(cid:12)bribery laws. We currently operate in, and may further expand into, key parts of the world that have experienced governmental corruption to some degree and, in certain circumstances, strict compliance with anti(cid:12)bribery laws may conflict with local customs and practices. In addition, due to the level of regulation in our industry, our operations in certain (cid:61)urisdictions, including China, India, South America, and the Middle East, require substantial government contact, either directly by us or through intermediaries over whom we have less direct control, such as subcontractors, agents, and partners (such as (cid:61)oint venture partners), where norms can differ from U.S. standards. Although we have implemented policies, procedures, and, in certain cases, contractual arrangements designed to facilitate compliance with these anti(cid:12)bribery laws, our officers, directors, associates, subcontractors, agents, and partners may take actions in violation of our policies, procedures, contractual arrangements, and anti(cid:12)bribery laws. Any such violation, even if prohibited by our policies, could sub(cid:61)ect us and such persons to criminal and/or civil penalties or other sanctions potentially by government prosecutors from more than one country, which could have a material adverse effect on our business, financial condition, cash flows, and reputation. 41 (cid:17)(cid:48)(cid:56)(cid:43)ro(cid:48)m(cid:39)(cid:48)(cid:54)a(cid:46) o(cid:36)(cid:46)(cid:43)(cid:41)a(cid:54)(cid:43)o(cid:48)(cid:53) a(cid:48)(cid:38) (cid:46)(cid:43)a(cid:36)(cid:43)(cid:46)(cid:43)(cid:54)(cid:43)(cid:39)(cid:53) (cid:37)ou(cid:46)(cid:38) (cid:42)a(cid:56)(cid:39) a (cid:53)u(cid:36)(cid:53)(cid:54)a(cid:48)(cid:54)(cid:43)a(cid:46) (cid:48)(cid:39)(cid:41)a(cid:54)(cid:43)(cid:56)(cid:39) (cid:43)m(cid:50)a(cid:37)(cid:54) o(cid:48) our (cid:36)u(cid:53)(cid:43)(cid:48)(cid:39)(cid:53)(cid:53)(cid:5) (cid:40)(cid:43)(cid:48)a(cid:48)(cid:37)(cid:43)a(cid:46) (cid:37)o(cid:48)(cid:38)(cid:43)(cid:54)(cid:43)o(cid:48)(cid:5) a(cid:48)(cid:38) r(cid:39)(cid:53)u(cid:46)(cid:54)(cid:53) o(cid:40) o(cid:50)(cid:39)ra(cid:54)(cid:43)o(cid:48)(cid:53)(cid:7) Our operations involve the use, handling, generation, processing, storage, transportation, and disposal of hazardous materials and are sub(cid:61)ect to extensive environmental laws and regulations at the national, state, local, and international levels. These environmental laws and regulations include those governing the discharge of pollutants into the air and water, the use, management, and disposal of hazardous materials and wastes, the cleanup of contaminated sites, and occupational health and safety. As we expand our business into foreign (cid:61)urisdictions worldwide, our environmental compliance burden may continue to increase both in terms of magnitude and complexity. We have incurred and may continue to incur significant costs in complying with these laws and regulations. In addition, violations of, or liabilities under, environmental laws or permits may result in restrictions being imposed on our operating activities or in our being sub(cid:61)ect to substantial fines, penalties, criminal proceedings, third(cid:12)party property damage or personal in(cid:61)ury claims, cleanup costs, or other costs. While we believe we are currently in substantial compliance with applicable environmental requirements, future developments such as more aggressive enforcement policies, the implementation of new, more stringent laws and regulations, or the discovery of presently unknown environmental conditions may require expenditures that could have a material adverse effect on our business, financial condition, and results of operations. Our solar modules contain CdTe and other semiconductor materials. Elemental cadmium and certain of its compounds are regulated as hazardous materials due to the adverse health effects that may arise from human exposure. Based on existing research, the risks of exposure to CdTe are not believed to be as serious as those relating to exposure to elemental cadmium due to CdTe(cid:89)s limited bioavailability. In our manufacturing operations, we maintain engineering controls to minimize our associates(cid:89) exposure to cadmium compounds and require our associates who handle cadmium compounds to follow certain safety procedures, including the use of personal protective equipment such as respirators, chemical goggles, and protective clothing. Relevant studies and third(cid:12)party peer reviews of our technology have concluded that the risk of exposure to cadmium or cadmium compounds from our end(cid:12)products is negligible. In addition, the risk of exposure is further minimized by the encapsulated nature of these materials in our products, the physical properties of cadmium compounds used in our products, and the recycling or responsible disposal of our modules. While we believe that these factors and procedures are sufficient to protect our associates, end users, and the general public from adverse health effects that may arise from cadmium exposure, we cannot ensure that human or environmental exposure to cadmium or cadmium compounds used in our products will not occur. Any such exposure could result in future third(cid:12)party claims against us, damage to our reputation, and heightened regulatory scrutiny, which could limit or impair our ability to sell and distribute our products. The occurrence of future events such as these could have a material adverse effect on our business, financial condition, and results of operations. The use of cadmium or cadmium compounds in various products is also coming under increasingly stringent governmental regulation. Future regulation in this area could impact the manufacturing, sale, collection, and recycling of solar modules and could require us to make unforeseen environmental expenditures or limit our ability to sell and distribute our products. For example, European Union Directive 2011/(cid:21)5/EU on the Restriction of the Use of Hazardous Substances ((cid:87)RoHS(cid:88)) in electrical and electronic equipment (the (cid:87)RoHS Directive(cid:88)) restricts the use of certain hazardous substances, including cadmium and its compounds, in specified products. Other (cid:61)urisdictions, such as China, have adopted similar legislation or are considering doing so. Currently, P(cid:48) solar modules are explicitly excluded from the scope of RoHS (Article 2), as adopted by the European Parliament and the Council in June 2011. The next general review of the RoHS Directive is scheduled for 2021, involving a broader discussion of the existing scope. In preparation for the next RoHS revision, the European Commission has started a number of pre(cid:12)regulatory studies and assessments relating to the addition of new substances to the existing RoHS framework, as well as the revision and optimization of the exemption process. It is unclear to what extent the existing scope exclusions will be discussed or maintained in future directives. If P(cid:48) modules were to be included in the scope of future RoHS revisions without an exemption or exclusion, we would be required to redesign our solar modules to reduce cadmium and other affected hazardous substances to the maximum allowable concentration thresholds in the RoHS Directive in order to continue to offer them for sale within the EU. As such actions would be 42 impractical, this type of regulatory development would effectively close the EU market to us, which could have a material adverse effect on our business, financial condition, and results of operations. Ri(cid:66)(cid:58)(cid:66) Relate(cid:51) t(cid:62) t(cid:55)e CO(cid:44)ID(cid:8)(cid:12)(cid:20) (cid:38)an(cid:51)e(cid:60)i(cid:50) (cid:31)(cid:42)(cid:39) (cid:15)(cid:26)(cid:33)(cid:20)(cid:16)-1(cid:11) (cid:50)a(cid:48)(cid:38)(cid:39)m(cid:43)(cid:37) (cid:37)ou(cid:46)(cid:38) ma(cid:54)(cid:39)r(cid:43)a(cid:46)(cid:46)y (cid:43)m(cid:50)a(cid:37)(cid:54) our (cid:36)u(cid:53)(cid:43)(cid:48)(cid:39)(cid:53)(cid:53)(cid:5) (cid:40)(cid:43)(cid:48)a(cid:48)(cid:37)(cid:43)a(cid:46) (cid:37)o(cid:48)(cid:38)(cid:43)(cid:54)(cid:43)o(cid:48)(cid:5) a(cid:48)(cid:38) r(cid:39)(cid:53)u(cid:46)(cid:54)(cid:53) o(cid:40) o(cid:50)(cid:39)ra(cid:54)(cid:43)o(cid:48)(cid:53)(cid:7) The CO(cid:48)ID(cid:12)19 pandemic has continued to have an unprecedented impact on the United States, Malaysia, and other countries throughout the world, including those in which we do business or have operations. Although as of the date of this filing, we have not been materially impacted by the CO(cid:48)ID(cid:12)19 pandemic, the pandemic could materially impact our business, financial condition, and results of operations in the future. The extent to which the CO(cid:48)ID(cid:12)19 pandemic could impact us continues to be highly uncertain and cannot be predicted, and will depend largely on subsequent developments, including the severity and duration of the pandemic, measures taken to contain the spread of the virus, such as restrictions on travel and gatherings of people and temporary closures of or limitations on businesses and other commercial activities, and the timing and nature of policies implemented by governmental authorities to ease such measures. As a result of the CO(cid:48)ID(cid:12)19 pandemic and these related containment measures and reopening policies, we may be sub(cid:61)ect to significant risks, which have the potential to materially and adversely impact our business, financial condition, and results of operations, including the following: (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) the continued economic disruption caused by the CO(cid:48)ID(cid:12)19 pandemic may result in a long(cid:12)term tightening of the supply of capital in global financial markets (including, in the United States, a reduction in total tax equity availability), which could make it difficult for purchasers of our modules or our development pro(cid:61)ects to secure the debt or equity capital necessary to finance a P(cid:48) solar power system, thereby delaying or reducing demand for our modules or these pro(cid:61)ects(cid:26) purchasers of P(cid:48) modules may delay module procurement in response to the CO(cid:48)ID(cid:12)19 pandemic, which may result in additional pressure on global demand and average selling prices for modules, and may exacerbate structural imbalances between global P(cid:48) module supply and demand(cid:26) we may at any time be ordered by governmental authorities, or we may determine, based on our understanding of the recommendations or orders of governmental authorities, that we have to curtail or cease business operations or activities, including manufacturing(cid:26) the failure of our suppliers or vendors to supply materials or equipment, or the failure of our vendors to install, repair, or replace our specialized equipment, due to the CO(cid:48)ID(cid:12)19 pandemic, related containment measures, or limitations on logistics providers(cid:89) ability to operate, may idle, slowdown, shutdown, or otherwise cause us to ad(cid:61)ust our manufacturing capacity. We have incurred manufacturing charges associated with the ongoing CO(cid:48)ID(cid:12)19 pandemic(cid:26) the CO(cid:48)ID(cid:12)19 pandemic and related containment measures may result in us incurring delays in obtaining, or failing to obtain, the approvals or rights that are required for our development pro(cid:61)ects to proceed, such as permitting, interconnection, or land usage approvals or rights, and the CO(cid:48)ID(cid:12)19 pandemic and related containment measures may delay or prevent the performance by third parties of activities related to the development of these pro(cid:61)ects, such as interconnection, engineering, procurement, construction, and other activities(cid:26) we perform substantial R(cid:6)D to continue to improve our module wattage (or conversion efficiency), lower our module cost per watt, lower the overall LCOE of our P(cid:48) solar power systems, and otherwise keep pace with technological advances in the solar industry. The CO(cid:48)ID(cid:12)19 pandemic and related containment 43 measures, including the unavailability of our personnel and third(cid:12)party partners who are engaged in R(cid:6)D activities, may inhibit our R(cid:6)D efforts or our ability to timely advance or commercialize these efforts(cid:26) and (cid:82) in response to the CO(cid:48)ID(cid:12)19 pandemic, the vast ma(cid:61)ority of our associates who are capable of performing their function remotely are telecommuting (i.e., working from home). While we have instituted security measures to minimize the likelihood and impact of a cybersecurity incident with respect to associates utilizing technological communications tools, these measures may be inadequate to prevent a cybersecurity breach because of the unprecedented number of associates continuously using these tools. Recently, there have been reports of a surge in widespread cyber(cid:12)attacks during the CO(cid:48)ID(cid:12)19 pandemic. Any increase in the frequency or scope of cyber(cid:12)attacks during the CO(cid:48)ID(cid:12)19 pandemic may exacerbate the aforementioned cybersecurity risks. In addition, while we have, among other things, established enhanced cleaning procedures at our facilities and protocols for responding when our associates are infected, we cannot assure these will be sufficient to mitigate the risks faced by our work force or the liability we may face as a result of any outbreaks of CO(cid:48)ID(cid:12)19. If the severity and duration of the CO(cid:48)ID(cid:12)19 pandemic does not abate and related containment measures are not lifted, are eased more slowly than anticipated, or are reinstituted, many of the other risks described herein may have a significant impact on our business, financial condition, and results of operations. General Ri(cid:66)(cid:58) Fa(cid:50)t(cid:62)r(cid:66) (cid:20)(cid:40) our (cid:46)o(cid:48)(cid:41)-(cid:46)(cid:43)(cid:56)(cid:39)(cid:38) a(cid:53)(cid:53)(cid:39)(cid:54)(cid:53) or (cid:50)ro(cid:44)(cid:39)(cid:37)(cid:54) r(cid:39)(cid:46)a(cid:54)(cid:39)(cid:38) a(cid:53)(cid:53)(cid:39)(cid:54)(cid:53) (cid:36)(cid:39)(cid:37)om(cid:39) (cid:43)m(cid:50)a(cid:43)r(cid:39)(cid:38)(cid:5) (cid:57)(cid:39) may (cid:36)(cid:39) r(cid:39)(cid:51)u(cid:43)r(cid:39)(cid:38) (cid:54)o r(cid:39)(cid:37)or(cid:38) (cid:53)(cid:43)(cid:41)(cid:48)(cid:43)(cid:40)(cid:43)(cid:37)a(cid:48)(cid:54) (cid:37)(cid:42)ar(cid:41)(cid:39)(cid:53) (cid:54)o (cid:39)ar(cid:48)(cid:43)(cid:48)(cid:41)(cid:53)(cid:7) We may be required to record significant charges to earnings should we determine that our long(cid:12)lived assets or pro(cid:61)ect related assets are impaired. Such charges may have a material impact on our financial position and results of operations. We review long(cid:12)lived and pro(cid:61)ect related assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. We consider a pro(cid:61)ect commercially viable or recoverable if it is anticipated to be sold for a profit once it is either fully developed or fully constructed or if the expected operating cash flows from future power generation exceed the cost basis of the asset. If our pro(cid:61)ects are not considered commercially viable, we would be required to impair the respective assets. (cid:26)ur (cid:37)r(cid:39)(cid:38)(cid:43)(cid:54) a(cid:41)r(cid:39)(cid:39)m(cid:39)(cid:48)(cid:54)(cid:53) (cid:37)o(cid:48)(cid:54)a(cid:43)(cid:48) (cid:37)o(cid:56)(cid:39)(cid:48)a(cid:48)(cid:54) r(cid:39)(cid:53)(cid:54)r(cid:43)(cid:37)(cid:54)(cid:43)o(cid:48)(cid:53) (cid:54)(cid:42)a(cid:54) may (cid:46)(cid:43)m(cid:43)(cid:54) our a(cid:36)(cid:43)(cid:46)(cid:43)(cid:54)y (cid:54)o o(cid:50)(cid:39)ra(cid:54)(cid:39) our (cid:36)u(cid:53)(cid:43)(cid:48)(cid:39)(cid:53)(cid:53)(cid:7) We may be unable to respond to changes in business and economic conditions, engage in transactions that might otherwise be beneficial to us, and obtain additional financing, if needed, because the senior secured credit facility made available under our amended and restated credit agreement with several financial institutions as lenders and JPMorgan Chase Bank, N.A. as administrative agent (the (cid:87)Revolving Credit Facility(cid:88)) and certain of our pro(cid:61)ect financing arrangements contain, and other future debt agreements may contain, covenant restrictions that limit our ability to, among other things: (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) incur additional debt, assume obligations in connection with letters of credit, or issue guarantees(cid:26) create liens(cid:26) enter into certain transactions with our affiliates(cid:26) sell certain assets(cid:26) and declare or pay dividends, make other distributions to stockholders, or make other restricted payments. 44 Under our Revolving Credit Facility and certain of our pro(cid:61)ect financing arrangements, we are also sub(cid:61)ect to certain financial covenants. Our ability to comply with covenants under our credit agreements is dependent on our future performance or the performance of specifically financed pro(cid:61)ects, which will be sub(cid:61)ect to many factors, some of which are beyond our control, including prevailing economic conditions. In addition, our failure to comply with these covenants could result in a default under these agreements and any of our other future debt agreements, which if not cured or waived, could permit the holders thereof to accelerate such debt and could cause cross(cid:12)defaults under our other facility agreements and the possible acceleration of debt under such agreements, as well as cross(cid:12)defaults under certain of our key pro(cid:61)ect and operational agreements and could also result in requirements to post additional security instruments to secure future obligations. In addition, certain events that occur within the Company, or in the industry or the economy as a whole, may constitute material adverse effects under these agreements. If it is determined that a material adverse effect has occurred, the lenders can, under certain circumstances, restrict future borrowings or accelerate the due date of outstanding amounts. If any of our debt is accelerated, we may experience cross(cid:12)defaults under our other debt or operational agreements, which could materially and adversely affect our business, financial condition, and results of operations. (cid:15)y(cid:36)(cid:39)r-a(cid:54)(cid:54)a(cid:37)(cid:45)(cid:53) or o(cid:54)(cid:42)(cid:39)r (cid:36)r(cid:39)a(cid:37)(cid:42)(cid:39)(cid:53) o(cid:40) our (cid:43)(cid:48)(cid:40)orma(cid:54)(cid:43)o(cid:48) (cid:53)y(cid:53)(cid:54)(cid:39)m(cid:53)(cid:5) or (cid:54)(cid:42)o(cid:53)(cid:39) o(cid:40) (cid:54)(cid:42)(cid:43)r(cid:38) (cid:50)ar(cid:54)(cid:43)(cid:39)(cid:53) (cid:57)(cid:43)(cid:54)(cid:42) (cid:57)(cid:42)(cid:43)(cid:37)(cid:42) (cid:57)(cid:39) (cid:38)o (cid:36)u(cid:53)(cid:43)(cid:48)(cid:39)(cid:53)(cid:53)(cid:5) (cid:37)ou(cid:46)(cid:38) (cid:42)a(cid:56)(cid:39) a ma(cid:54)(cid:39)r(cid:43)a(cid:46) a(cid:38)(cid:56)(cid:39)r(cid:53)(cid:39) (cid:39)(cid:40)(cid:40)(cid:39)(cid:37)(cid:54) o(cid:48) our (cid:36)u(cid:53)(cid:43)(cid:48)(cid:39)(cid:53)(cid:53)(cid:5) (cid:40)(cid:43)(cid:48)a(cid:48)(cid:37)(cid:43)a(cid:46) (cid:37)o(cid:48)(cid:38)(cid:43)(cid:54)(cid:43)o(cid:48)(cid:5) a(cid:48)(cid:38) r(cid:39)(cid:53)u(cid:46)(cid:54)(cid:53) o(cid:40) o(cid:50)(cid:39)ra(cid:54)(cid:43)o(cid:48)(cid:53)(cid:7) Our operations rely on our computer systems, hardware, software, and networks, as well as those of third parties with which we do business, to securely process, store, and transmit proprietary, confidential, and other information, including intellectual property. We also rely heavily on these information systems to operate our manufacturing lines and P(cid:48) solar power plants. These information systems may be compromised by cyber(cid:12)attacks, computer viruses, and other events that could be materially disruptive to our business operations and could put the security of our information, and that of the third parties with which we do business, at risk of misappropriation or destruction. In recent years, such cyber incidents have become increasingly frequent and sophisticated, targeting or otherwise affecting a wide range of companies. While we have instituted security measures to minimize the likelihood and impact of a cyber incident, there is no assurance that these measures, or those of the third parties with which we do business, will be adequate in the future. If these measures fail, valuable information may be lost(cid:26) our manufacturing, development, construction, O(cid:6)M, and other operations may be disrupted(cid:26) we may be unable to fulfill our customer obligations(cid:26) and our reputation may suffer. For example, any cyber incident affecting our automated manufacturing lines could adversely affect our ability to produce solar modules or otherwise affect the quality and performance of the modules produced. We may also be sub(cid:61)ect to litigation, regulatory action, remedial expenses, and financial losses beyond the scope or limits of our insurance coverage. These consequences of a failure of security measures could, individually or in the aggregate, have a material adverse effect on our business, financial condition, and results of operations. As a result of the CO(cid:48)ID(cid:12)19 pandemic, the vast ma(cid:61)ority of our associates who are capable of performing their function remotely are telecommuting, which may exacerbate the aforementioned cybersecurity risks. See the Risk Factor entitled (cid:87)The CO(cid:48)ID(cid:12)19 pandemic could materially impact our business, financial condition, and results of operations.(cid:88) (cid:34)(cid:39) may (cid:48)o(cid:54) r(cid:39)a(cid:46)(cid:43)(cid:60)(cid:39) (cid:54)(cid:42)(cid:39) a(cid:48)(cid:54)(cid:43)(cid:37)(cid:43)(cid:50)a(cid:54)(cid:39)(cid:38) (cid:36)(cid:39)(cid:48)(cid:39)(cid:40)(cid:43)(cid:54)(cid:53) o(cid:40) (cid:50)a(cid:53)(cid:54) or (cid:40)u(cid:54)ur(cid:39) (cid:36)u(cid:53)(cid:43)(cid:48)(cid:39)(cid:53)(cid:53) (cid:37)om(cid:36)(cid:43)(cid:48)a(cid:54)(cid:43)o(cid:48)(cid:53) or a(cid:37)(cid:51)u(cid:43)(cid:53)(cid:43)(cid:54)(cid:43)o(cid:48) (cid:54)ra(cid:48)(cid:53)a(cid:37)(cid:54)(cid:43)o(cid:48)(cid:53)(cid:5) a(cid:48)(cid:38) (cid:43)(cid:48)(cid:54)(cid:39)(cid:41)ra(cid:54)(cid:43)o(cid:48) o(cid:40) (cid:36)u(cid:53)(cid:43)(cid:48)(cid:39)(cid:53)(cid:53) (cid:37)om(cid:36)(cid:43)(cid:48)a(cid:54)(cid:43)o(cid:48)(cid:53) may (cid:38)(cid:43)(cid:53)ru(cid:50)(cid:54) our (cid:36)u(cid:53)(cid:43)(cid:48)(cid:39)(cid:53)(cid:53) a(cid:48)(cid:38) ma(cid:48)a(cid:41)(cid:39)m(cid:39)(cid:48)(cid:54)(cid:7) We have made several acquisitions in prior years and in the future we may acquire additional companies, pro(cid:61)ect pipelines, products, equity interests, or technologies or enter into (cid:61)oint ventures or other strategic initiatives. We may not realize the anticipated benefits of such business combinations or acquisitions, and each transaction has numerous risks, which may include the following: (cid:82) difficulty in assimilating the operations and personnel of the acquired or partner company(cid:26) 45 (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) (cid:82) difficulty in effectively integrating the acquired products or technologies with our current products or technologies(cid:26) difficulty in achieving profitable commercial scale from acquired technologies(cid:26) difficulty in maintaining controls, procedures, and policies during the transition and integration(cid:26) disruption of our ongoing business and distraction of our management and associates from other opportunities and challenges due to integration issues(cid:26) difficulty integrating the acquired or partner company(cid:89)s accounting, management information, and other administrative systems(cid:26) difficulty managing (cid:61)oint ventures with our partners, potential litigation with (cid:61)oint venture partners, and reliance upon (cid:61)oint ventures that we do not control(cid:26) inability to retain key technical and managerial personnel of the acquired business(cid:26) inability to retain key customers, vendors, and other business partners of the acquired business(cid:26) inability to achieve the financial and strategic goals for the acquired and combined businesses, as a result of insufficient capital resources or otherwise(cid:26) incurring acquisition(cid:12)related costs or amortization costs for acquired intangible assets that could impact our operating results(cid:26) potential impairment of our relationships with our associates, customers, partners, distributors, or third(cid:12) party providers of products or technologies(cid:26) potential failure of the due diligence processes to identify significant issues with product quality, legal and financial liabilities, among other things(cid:26) potential inability to assert that internal controls over financial reporting are effective(cid:26) potential inability to obtain, or obtain in a timely manner, approvals from governmental authorities, which could delay or prevent such acquisitions(cid:26) and potential delay in customer purchasing decisions due to uncertainty about the direction of our product offerings. Mergers and acquisitions of companies are inherently risky, and ultimately, if we do not complete the integration of acquired businesses successfully and in a timely manner, we may not realize the anticipated benefits of the acquisitions to the extent anticipated, which could adversely affect our business, financial condition, or results of operations. In addition, we may seek to dispose of our interests in acquired companies, pro(cid:61)ect pipelines, products, or technologies. We may not recover our initial investment in such interests, in part or at all, which could adversely affect our business, financial condition, or results of operations. (cid:26)ur (cid:40)u(cid:54)ur(cid:39) (cid:53)u(cid:37)(cid:37)(cid:39)(cid:53)(cid:53) (cid:38)(cid:39)(cid:50)(cid:39)(cid:48)(cid:38)(cid:53) o(cid:48) our a(cid:36)(cid:43)(cid:46)(cid:43)(cid:54)y (cid:54)o r(cid:39)(cid:54)a(cid:43)(cid:48) our (cid:45)(cid:39)y a(cid:53)(cid:53)o(cid:37)(cid:43)a(cid:54)(cid:39)(cid:53) a(cid:48)(cid:38) (cid:54)o (cid:53)u(cid:37)(cid:37)(cid:39)(cid:53)(cid:53)(cid:40)u(cid:46)(cid:46)y (cid:43)(cid:48)(cid:54)(cid:39)(cid:41)ra(cid:54)(cid:39) (cid:54)(cid:42)(cid:39)m (cid:43)(cid:48)(cid:54)o our ma(cid:48)a(cid:41)(cid:39)m(cid:39)(cid:48)(cid:54) (cid:54)(cid:39)am(cid:7) We are dependent on the services of our executive officers and other members of our senior management team. The loss of one or more of these key associates or any other member of our senior management team could have a 4(cid:21) material adverse effect on our business. We may not be able to retain or replace these key associates and may not have adequate succession plans in place. Several of our current key associates including our executive officers are sub(cid:61)ect to employment conditions or arrangements that contain post(cid:12)employment non(cid:12)competition provisions. However, these arrangements permit the associates to terminate their employment with us upon little or no notice. (cid:20)(cid:40) (cid:57)(cid:39) ar(cid:39) u(cid:48)a(cid:36)(cid:46)(cid:39) (cid:54)o a(cid:54)(cid:54)ra(cid:37)(cid:54)(cid:5) (cid:54)ra(cid:43)(cid:48)(cid:5) a(cid:48)(cid:38) r(cid:39)(cid:54)a(cid:43)(cid:48) (cid:45)(cid:39)y (cid:50)(cid:39)r(cid:53)o(cid:48)(cid:48)(cid:39)(cid:46)(cid:5) our (cid:36)u(cid:53)(cid:43)(cid:48)(cid:39)(cid:53)(cid:53) may (cid:36)(cid:39) ma(cid:54)(cid:39)r(cid:43)a(cid:46)(cid:46)y a(cid:48)(cid:38) a(cid:38)(cid:56)(cid:39)r(cid:53)(cid:39)(cid:46)y a(cid:40)(cid:40)(cid:39)(cid:37)(cid:54)(cid:39)(cid:38)(cid:7) Our future success depends, to a significant extent, on our ability to attract, train, and retain management, operations, sales, and technical personnel, including personnel in foreign (cid:61)urisdictions. Recruiting and retaining capable personnel, particularly those with expertise in the P(cid:48) solar industry across a variety of technologies, are vital to our success. There is substantial competition for qualified technical personnel, and while we continue to benchmark our organization against the broad spectrum of business in our market space to remain economically competitive, there can be no assurances that we will be able to attract and retain our technical personnel. If we are unable to attract and retain qualified associates, or otherwise experience unexpected labor disruptions within our business, we may be materially and adversely affected. (cid:34)(cid:39) may (cid:36)(cid:39) (cid:39)(cid:58)(cid:50)o(cid:53)(cid:39)(cid:38) (cid:54)o (cid:43)(cid:48)(cid:40)r(cid:43)(cid:48)(cid:41)(cid:39)m(cid:39)(cid:48)(cid:54) or m(cid:43)(cid:53)a(cid:50)(cid:50)ro(cid:50)r(cid:43)a(cid:54)(cid:43)o(cid:48) (cid:37)(cid:46)a(cid:43)m(cid:53) (cid:36)y (cid:54)(cid:42)(cid:43)r(cid:38) (cid:50)ar(cid:54)(cid:43)(cid:39)(cid:53)(cid:5) (cid:57)(cid:42)(cid:43)(cid:37)(cid:42)(cid:5) (cid:43)(cid:40) (cid:38)(cid:39)(cid:54)(cid:39)rm(cid:43)(cid:48)(cid:39)(cid:38) a(cid:38)(cid:56)(cid:39)r(cid:53)(cid:39)(cid:46)y (cid:54)o u(cid:53)(cid:5) (cid:37)ou(cid:46)(cid:38) (cid:37)au(cid:53)(cid:39) u(cid:53) (cid:54)o (cid:50)ay (cid:53)(cid:43)(cid:41)(cid:48)(cid:43)(cid:40)(cid:43)(cid:37)a(cid:48)(cid:54) (cid:38)ama(cid:41)(cid:39) a(cid:57)ar(cid:38)(cid:53) or (cid:50)ro(cid:42)(cid:43)(cid:36)(cid:43)(cid:54) u(cid:53) (cid:40)rom (cid:54)(cid:42)(cid:39) ma(cid:48)u(cid:40)a(cid:37)(cid:54)ur(cid:39) a(cid:48)(cid:38) (cid:53)a(cid:46)(cid:39) o(cid:40) our (cid:53)o(cid:46)ar mo(cid:38)u(cid:46)(cid:39)(cid:53) or (cid:54)(cid:42)(cid:39) u(cid:53)(cid:39) o(cid:40) our (cid:54)(cid:39)(cid:37)(cid:42)(cid:48)o(cid:46)o(cid:41)y(cid:7) Our success depends largely on our ability to use and develop our technology and know(cid:12)how without infringing or misappropriating the intellectual property rights of third parties. The validity and scope of claims relating to P(cid:48) solar technology patents involve complex scientific, legal, and factual considerations and analysis and, therefore, may be highly uncertain. We may be sub(cid:61)ect to litigation involving claims of patent infringement or violation of intellectual property rights of third parties. The defense and prosecution of intellectual property suits, patent opposition proceedings, and related legal and administrative proceedings can be both costly and time consuming and may significantly divert the efforts and resources of our technical and management personnel. An adverse determination in any such litigation or proceedings to which we may become a party could sub(cid:61)ect us to significant liability to third parties, require us to seek licenses from third parties, which may not be available on reasonable terms, or at all, or pay ongoing royalties, require us to redesign our solar modules, or sub(cid:61)ect us to in(cid:61)unctions prohibiting the manufacture and sale of our solar modules or the use of our technologies. Protracted litigation could also result in our customers or potential customers deferring or limiting their purchase or use of our solar modules until the resolution of such litigation. (cid:15)urr(cid:39)(cid:48)(cid:37)y (cid:54)ra(cid:48)(cid:53)(cid:46)a(cid:54)(cid:43)o(cid:48) a(cid:48)(cid:38) (cid:54)ra(cid:48)(cid:53)a(cid:37)(cid:54)(cid:43)o(cid:48) r(cid:43)(cid:53)(cid:45) may (cid:48)(cid:39)(cid:41)a(cid:54)(cid:43)(cid:56)(cid:39)(cid:46)y a(cid:40)(cid:40)(cid:39)(cid:37)(cid:54) our r(cid:39)(cid:53)u(cid:46)(cid:54)(cid:53) o(cid:40) o(cid:50)(cid:39)ra(cid:54)(cid:43)o(cid:48)(cid:53)(cid:7) Although our reporting currency is the U.S. dollar, we conduct certain business and incur costs in the local currency of most countries in which we operate. As a result, we are sub(cid:61)ect to currency translation and transaction risk. For example, certain of our net sales in 2020 were denominated in foreign currencies, such as Japanese yen and Euro, and we expect to continue to have net sales denominated in foreign currencies in the future. Joint ventures or other business arrangements with strategic partners outside the United States have involved, and in the future may involve, significant investments denominated in local currencies. Changes in exchange rates between foreign currencies and the U.S. dollar could affect our results of operations and result in exchange gains or losses. We cannot accurately predict the impact of future exchange rate fluctuations on our results of operations. We could also expand our business into emerging markets, many of which have an uncertain regulatory environment relating to currency policy. Conducting business in such emerging markets could cause our exposure to changes in exchange rates to increase, due to the relatively high volatility associated with emerging market currencies and potentially longer payment terms for our proceeds. Our ability to hedge foreign currency exposure is dependent on our credit profile with the banks that are willing and able to do business with us. Deterioration in our credit position or a significant tightening of the credit market 4(cid:22) conditions could limit our ability to hedge our foreign currency exposures(cid:26) and therefore, result in exchange gains or losses. (cid:32)(cid:48)a(cid:48)(cid:54)(cid:43)(cid:37)(cid:43)(cid:50)a(cid:54)(cid:39)(cid:38) (cid:37)(cid:42)a(cid:48)(cid:41)(cid:39)(cid:53) (cid:43)(cid:48) our (cid:54)a(cid:58) (cid:50)ro(cid:56)(cid:43)(cid:53)(cid:43)o(cid:48)(cid:5) (cid:54)(cid:42)(cid:39) (cid:39)(cid:48)a(cid:37)(cid:54)m(cid:39)(cid:48)(cid:54) o(cid:40) (cid:48)(cid:39)(cid:57) (cid:54)a(cid:58) (cid:46)(cid:39)(cid:41)(cid:43)(cid:53)(cid:46)a(cid:54)(cid:43)o(cid:48)(cid:5) or (cid:39)(cid:58)(cid:50)o(cid:53)ur(cid:39) (cid:54)o a(cid:38)(cid:38)(cid:43)(cid:54)(cid:43)o(cid:48)a(cid:46) (cid:43)(cid:48)(cid:37)om(cid:39) (cid:54)a(cid:58) (cid:46)(cid:43)a(cid:36)(cid:43)(cid:46)(cid:43)(cid:54)(cid:43)(cid:39)(cid:53) (cid:37)ou(cid:46)(cid:38) a(cid:40)(cid:40)(cid:39)(cid:37)(cid:54) our (cid:50)ro(cid:40)(cid:43)(cid:54)a(cid:36)(cid:43)(cid:46)(cid:43)(cid:54)y(cid:7) We are sub(cid:61)ect to income taxes in the (cid:61)urisdictions in which we operate. In March 2020, the Coronavirus Aid, Relief, and Economic Security Act (the (cid:87)CARES Act(cid:88)) was signed into law. The changes included in the CARES Act are broad and complex, and the final effects of the CARES Act may differ from the amounts provided elsewhere in this Annual Report on Form 10(cid:12)K, possibly materially, due to, among other things, changes in regulations related to the CARES Act, any legislative action to address questions that arise because of the CARES Act, any changes in accounting standards for income taxes or related interpretations in response to the CARES Act, or actions we may take as a result of the CARES Act. Additionally, longstanding international tax laws that determine each country(cid:89)s (cid:61)urisdictional tax rights in cross(cid:12)border international trade continue to evolve as a result of the base erosion and profit shifting reporting requirements recommended by the OECD. As these and other tax laws and regulations change, our business, financial condition, and results of operations could be adversely affected. We are sub(cid:61)ect to potential tax examinations in various (cid:61)urisdictions, and taxing authorities may disagree with our interpretations of U.S. and foreign tax laws and may assess additional taxes. We regularly assess the likely outcomes of these examinations in order to determine the appropriateness of our tax provision(cid:26) however, the outcome of tax examinations cannot be predicted with certainty. Therefore, the amounts ultimately paid upon resolution of such examinations could be materially different from the amounts previously included in our income tax provision, which could have a material impact on our results of operations and cash flows. In addition, our future effective tax rate could be adversely affected by changes to our operating structure, losses of tax holidays, changes in the (cid:61)urisdictional mix of earnings among countries with tax holidays or differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws, and the discovery of new information in the course of our tax return preparation process. Any changes in our effective tax rate may materially and adversely impact our results of operations. (cid:34)(cid:39) (cid:42)a(cid:56)(cid:39) (cid:36)(cid:39)(cid:39)(cid:48) a(cid:48)(cid:38) may (cid:36)(cid:39) (cid:53)u(cid:36)(cid:44)(cid:39)(cid:37)(cid:54) (cid:54)o or (cid:43)(cid:48)(cid:56)o(cid:46)(cid:56)(cid:39)(cid:38) (cid:43)(cid:48) (cid:46)(cid:43)(cid:54)(cid:43)(cid:41)a(cid:54)(cid:43)o(cid:48) or (cid:54)(cid:42)r(cid:39)a(cid:54)(cid:39)(cid:48)(cid:39)(cid:38) (cid:46)(cid:43)(cid:54)(cid:43)(cid:41)a(cid:54)(cid:43)o(cid:48)(cid:5) (cid:54)(cid:42)(cid:39) ou(cid:54)(cid:37)om(cid:39) o(cid:40) (cid:57)(cid:42)(cid:43)(cid:37)(cid:42) may (cid:36)(cid:39) (cid:38)(cid:43)(cid:40)(cid:40)(cid:43)(cid:37)u(cid:46)(cid:54) (cid:54)o (cid:50)r(cid:39)(cid:38)(cid:43)(cid:37)(cid:54)(cid:5) a(cid:48)(cid:38) (cid:57)(cid:42)(cid:43)(cid:37)(cid:42) may (cid:36)(cid:39) (cid:37)o(cid:53)(cid:54)(cid:46)y (cid:54)o (cid:38)(cid:39)(cid:40)(cid:39)(cid:48)(cid:38)(cid:5) (cid:38)(cid:43)(cid:56)(cid:39)r(cid:54) ma(cid:48)a(cid:41)(cid:39)m(cid:39)(cid:48)(cid:54) a(cid:54)(cid:54)(cid:39)(cid:48)(cid:54)(cid:43)o(cid:48)(cid:5) r(cid:39)(cid:51)u(cid:43)r(cid:39) u(cid:53) (cid:54)o (cid:50)ay (cid:38)ama(cid:41)(cid:39)(cid:53)(cid:5) or r(cid:39)(cid:53)(cid:54)r(cid:43)(cid:37)(cid:54) (cid:54)(cid:42)(cid:39) o(cid:50)(cid:39)ra(cid:54)(cid:43)o(cid:48) o(cid:40) our (cid:36)u(cid:53)(cid:43)(cid:48)(cid:39)(cid:53)(cid:53)(cid:7) From time to time, we have been and may be sub(cid:61)ect to disputes and litigation, with and without merit, that may be costly and which may divert the attention of our management and our resources in general, whether or not any dispute actually proceeds to litigation. The results of complex legal proceedings are difficult to predict. Moreover, complaints filed against us may not specify the amount of damages that plaintiffs seek, and we therefore may be unable to estimate the possible range of damages that might be incurred should these lawsuits be resolved against us. Even if we are able to estimate losses related to these actions, the ultimate amount of loss may be materially higher than our estimates. Any resolution of litigation, or threatened litigation, could involve the payment of damages or expenses by us, which may be significant, involve an agreement with terms that restrict the operation of our business, or adversely impact our ability to proceed with the construction or sale of a given pro(cid:61)ect. Even if any future lawsuits are not resolved against us, the costs of defending such lawsuits may be significant. These costs may exceed the dollar limits of our insurance policies or may not be covered at all by our insurance policies. Because the price of our common stock has been, and may continue to be, volatile, we can provide no assurance that additional securities or other litigation will not be filed against us in the future. See Note 13. (cid:87)Commitments and Contingencies (cid:85) Legal Proceedings(cid:88) to our consolidated financial statements for more information on our legal proceedings. 4(cid:23) (cid:15)(cid:42)a(cid:48)(cid:41)(cid:39)(cid:53) (cid:43)(cid:48)(cid:5) or a(cid:48)y (cid:40)a(cid:43)(cid:46)ur(cid:39) (cid:54)o (cid:37)om(cid:50)(cid:46)y (cid:57)(cid:43)(cid:54)(cid:42)(cid:5) (cid:50)r(cid:43)(cid:56)a(cid:37)y (cid:46)a(cid:57)(cid:53)(cid:5) r(cid:39)(cid:41)u(cid:46)a(cid:54)(cid:43)o(cid:48)(cid:53)(cid:5) a(cid:48)(cid:38) (cid:53)(cid:54)a(cid:48)(cid:38)ar(cid:38)(cid:53) may a(cid:38)(cid:56)(cid:39)r(cid:53)(cid:39)(cid:46)y a(cid:40)(cid:40)(cid:39)(cid:37)(cid:54) our (cid:36)u(cid:53)(cid:43)(cid:48)(cid:39)(cid:53)(cid:53)(cid:7) Personal privacy and data security have become significant issues in the United States, Europe, and in many other (cid:61)urisdictions in which we operate. The regulatory framework for privacy and security issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. Furthermore, federal, state, or foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws and regulations affecting data privacy, all of which may be sub(cid:61)ect to invalidation by relevant foreign (cid:61)udicial bodies. Industry organizations also regularly adopt and advocate for new standards in this area. In the United States, these include rules and regulations promulgated or pending under the authority of federal agencies, state attorneys general, legislatures, and consumer protection agencies. Internationally, many (cid:61)urisdictions in which we operate have established their own data security and privacy legal framework with which we, relevant suppliers, and customers must comply. For example, the General Data Protection Regulation, a broad(cid:12)based data privacy regime enacted by the European Parliament, which became effective in May 201(cid:23), imposes new requirements on how we collect, process, transfer, and store personal data, and also imposes additional obligations, potential penalties, and risk upon our business. Additionally, the California Consumer Privacy Act, which became effective in January 2020, imposes similar data privacy requirements. In many (cid:61)urisdictions, enforcement actions and consequences for noncompliance are also rising. In addition to government regulation, privacy advocates and industry groups may propose new and different self(cid:12)regulatory standards that either legally or contractually apply to us. Although we have implemented policies, procedures, and, in certain cases, contractual arrangements designed to facilitate compliance with applicable privacy and data security laws and standards, any inability or perceived inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable privacy and data security laws, regulations, and policies, could result in additional fines, costs, and liabilities to us, damage our reputation, inhibit sales, and adversely affect our business. Ite(cid:60) (cid:12)(cid:24). (cid:32)(cid:48)r(cid:39)(cid:53)o(cid:46)(cid:56)(cid:39)(cid:38) S(cid:54)a(cid:40)(cid:40) (cid:15)omm(cid:39)(cid:48)(cid:54)(cid:53) None. Ite(cid:60) (cid:13). (cid:27)ro(cid:50)(cid:39)r(cid:54)(cid:43)(cid:39)(cid:53) As of December 31, 2020, our principal properties consisted of the following: Nature Corporate headquarters . . . . . . . . . . Manufacturing plant, R(cid:6)D facility, and administrative offices (1) . . Administrative offices . . . . . . . . . . . R(cid:6)D facility . . . . . . . . . . . . . . . . . . Manufacturing plant and administrative offices . . . . . . . . Administrative offices . . . . . . . . . . . Manufacturing plant . . . . . . . . . . . . (cid:38)ri(cid:60)ar(cid:72) Seg(cid:60)ent(cid:4)(cid:66)(cid:5) U(cid:66)ing (cid:38)r(cid:62)(cid:63)ert(cid:72) Modules (cid:6) Systems L(cid:62)(cid:50)ati(cid:62)n Tempe, Arizona, United States Modules Systems Modules (cid:6) Systems Perrysburg, Ohio, United States San Francisco, California, United States Santa Clara, California, United States Modules Modules (cid:6) Systems Modules Kulim, Kedah, Malaysia Georgetown, Penang, Malaysia Ho Chi Minh City, (cid:48)ietnam Manufacturing plant (2) . . . . . . . . . . Modules Frankfurt/Oder, Germany (cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86) (cid:30)el(cid:51) Lease Own Lease Lease Lease land, own buildings Lease Lease land, own buildings Own (1) Includes our manufacturing plant located in Lake Township, Ohio, a short distance from our plant in Perrysburg, Ohio. (2) In December 2012, we ceased manufacturing at our German plant. Since its closure, we have, from time to time, marketed such property for sale. 49 Ite(cid:60) (cid:14). (cid:23)(cid:39)(cid:41)a(cid:46) (cid:27)ro(cid:37)(cid:39)(cid:39)(cid:38)(cid:43)(cid:48)(cid:41)(cid:53) See Note 13. (cid:87)Commitments and Contingencies (cid:85) Legal Proceedings(cid:88) to our consolidated financial statements for information regarding legal proceedings and related matters. Ite(cid:60) (cid:15). (cid:24)(cid:43)(cid:48)(cid:39) Sa(cid:40)(cid:39)(cid:54)y (cid:16)(cid:43)(cid:53)(cid:37)(cid:46)o(cid:53)ur(cid:39)(cid:53) None. (cid:38)ART II Ite(cid:60) (cid:16). (cid:24)ar(cid:45)(cid:39)(cid:54) (cid:40)or (cid:29)(cid:39)(cid:41)(cid:43)(cid:53)(cid:54)ra(cid:48)(cid:54)(cid:62)(cid:53) (cid:15)ommo(cid:48) (cid:17)(cid:51)u(cid:43)(cid:54)y(cid:5) (cid:29)(cid:39)(cid:46)a(cid:54)(cid:39)(cid:38) S(cid:54)o(cid:37)(cid:45)(cid:42)o(cid:46)(cid:38)(cid:39)r (cid:24)a(cid:54)(cid:54)(cid:39)r(cid:53)(cid:5) a(cid:48)(cid:38) (cid:20)(cid:53)(cid:53)u(cid:39)r (cid:27)ur(cid:37)(cid:42)a(cid:53)(cid:39)(cid:53) o(cid:40) (cid:17)(cid:51)u(cid:43)(cid:54)y S(cid:39)(cid:37)ur(cid:43)(cid:54)(cid:43)(cid:39)(cid:53) (cid:35)ar(cid:58)et In(cid:53)(cid:62)r(cid:60)ati(cid:62)n Our common stock is listed on The Nasdaq Stock Market LLC under the symbol FSLR. (cid:30)(cid:62)l(cid:51)er(cid:66) As of February 19, 2021, there were 4(cid:22) record holders of our common stock, which does not reflect beneficial owners of our shares. Di(cid:69)i(cid:51)en(cid:51) (cid:38)(cid:62)li(cid:50)(cid:72) We have never paid and do not expect to pay dividends on our common stock for the foreseeable future. Furthermore, our Revolving Credit Facility imposes restrictions on our ability to declare or pay dividends. The declaration and payment of dividends is sub(cid:61)ect to the discretion of our board of directors and depends on various factors, including our net income, financial condition, cash requirements, and future prospects as well as the restrictions under our Revolving Credit Facility and other factors considered relevant by our board of directors. We expect to prioritize our working capital requirements, capacity expansion and other capital expenditure needs, pro(cid:61)ect development and construction, and merger and acquisition opportunities prior to returning capital to our shareholders. St(cid:62)(cid:50)(cid:58) (cid:38)ri(cid:50)e (cid:38)er(cid:53)(cid:62)r(cid:60)an(cid:50)e Gra(cid:63)(cid:55) The following graph compares the five(cid:12)year cumulative total return on our common stock relative to the cumulative total returns of the S(cid:6)P 500 Index and the Invesco Solar ETF, which represents a peer group of solar companies. For purposes of the graph, an investment of (cid:4)100 (with reinvestment of all dividends) is assumed to have been made in our common stock, the S(cid:6)P 500 Index, and the Invesco Solar ETF on December 31, 2015, and its relative performance is tracked through December 31, 2020. This graph is not (cid:87)soliciting material,(cid:88) is not deemed filed with the SEC, and is not to be incorporated by reference in any filing by us under the Securities Act or the Exchange Act, whether made before or after the date hereof, and irrespective of any general incorporation language in any such filing. The stock price performance shown in the graph represents past performance and is not necessarily indicative of future stock price performance. 50 CO(cid:35)(cid:38)ARISON OF FI(cid:44)E(cid:8)(cid:47)EAR CU(cid:35)ULATI(cid:44)E TOTAL RETURN(cid:6) Among First Solar, the S(cid:6)P 500 Index, and the Invesco Solar ETF $400 $350 $300 $250 $200 $150 $100 $50 $0 12/15 12/16 12/17 12/18 12/19 12/20 First Solar, Inc. S&P 500 Invesco Solar ETF (cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86) (cid:9) (cid:4)100 invested on December 31, 2015 in stock or index, including reinvestment of dividends. Index calculated on a month(cid:12) end basis. Re(cid:50)ent Sale(cid:66) (cid:62)(cid:53) Unregi(cid:66)tere(cid:51) Se(cid:50)uritie(cid:66) None. (cid:38)ur(cid:50)(cid:55)a(cid:66)e(cid:66) (cid:62)(cid:53) E(cid:64)uit(cid:72) Se(cid:50)uritie(cid:66) (cid:49)(cid:72) t(cid:55)e I(cid:66)(cid:66)uer an(cid:51) A(cid:53)(cid:53)iliate (cid:38)ur(cid:50)(cid:55)a(cid:66)e(cid:66) None. 51 Ite(cid:60) (cid:17). S(cid:39)(cid:46)(cid:39)(cid:37)(cid:54)(cid:39)(cid:38) F(cid:43)(cid:48)a(cid:48)(cid:37)(cid:43)a(cid:46) (cid:16)a(cid:54)a The following tables set forth our selected financial data for the periods and at the dates indicated. The selected financial data from the consolidated statements of operations and consolidated statements of cash flows for the years ended December 31, 2020, 2019, and 201(cid:23) and the selected financial data from the consolidated balance sheets as of December 31, 2020 and 2019 have been derived from the audited consolidated financial statements included in this Annual Report on Form 10(cid:12)K. The selected financial data from the consolidated statements of operations and consolidated statements of cash flows for the years ended December 31, 201(cid:22) and 201(cid:21) and the selected financial data from the consolidated balance sheets as of December 31, 201(cid:23), 201(cid:22), and 201(cid:21) have been derived from audited consolidated financial statements not included in this Annual Report on Form 10(cid:12)K. The information presented below should also be read in con(cid:61)unction with our consolidated financial statements and the related notes thereto and Item (cid:22). (cid:87)Management(cid:89)s Discussion and Analysis of Financial Condition and Results of Operations.(cid:88) (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:19) (cid:13)(cid:11)(cid:12)(cid:18) (cid:13)(cid:11)(cid:12)(cid:17) (cid:47)ear(cid:66) En(cid:51)e(cid:51) De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income (loss) . . . . . . . . . . . . . . . . Net income (loss) . . . . . . . . . . . . . . . . . . . . . Net income (loss) per share: (cid:4)In t(cid:55)(cid:62)u(cid:66)an(cid:51)(cid:66), e(cid:71)(cid:50)e(cid:63)t (cid:63)er (cid:66)(cid:55)are a(cid:60)(cid:62)unt(cid:66)(cid:5) (cid:4) 2,(cid:22)11,332 (cid:4) 3,0(cid:21)3,11(cid:22) (cid:4) 2,244,044 (cid:4) 2,941,324 (cid:4) 2,904,5(cid:21)3 (cid:21)3(cid:23),41(cid:23) (5(cid:21)(cid:23),151) (41(cid:21),112) 549,212 (1(cid:21)1,(cid:22)(cid:23)5) (114,933) 54(cid:23),94(cid:22) 1(cid:22)(cid:22),(cid:23)51 (1(cid:21)5,(cid:21)15) 392,1(cid:22)(cid:22) 40,113 144,32(cid:21) (cid:21)(cid:23)0,(cid:21)(cid:22)3 31(cid:22),4(cid:23)9 39(cid:23),355 Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash dividends declared per common share . (cid:4) (cid:4) (cid:4) 3.(cid:22)(cid:21) (cid:4) 3.(cid:22)3 (cid:4) (cid:86) (cid:4) (1.09) (cid:4) (1.09) (cid:4) (cid:86) (cid:4) 1.3(cid:23) (cid:4) 1.3(cid:21) (cid:4) (cid:86) (cid:4) (1.59) (cid:4) (1.59) (cid:4) (cid:86) (cid:4) (4.05) (4.05) (cid:86) Net cash provided by (used in) operating activities . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) 3(cid:22),120 (cid:4) 1(cid:22)4,201 (cid:4) (32(cid:21),(cid:23)09) (cid:4) 1,340,(cid:21)(cid:22)(cid:22) (cid:4) 20(cid:21),(cid:22)53 Net cash (used in) provided by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . Net cash (used in) provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . (131,22(cid:22)) (3(cid:21)2,29(cid:23)) ((cid:21)(cid:23)2,(cid:22)14) ((cid:21)2(cid:21),(cid:23)02) 144,520 ((cid:23)2,5(cid:23)(cid:22)) (cid:22)4,943 255,22(cid:23) 192,045 (13(cid:21),393) (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:19) (cid:13)(cid:11)(cid:12)(cid:18) (cid:13)(cid:11)(cid:12)(cid:17) De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), Cash and cash equivalents . . . . . . . . . . . . . . . Marketable securities . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . Total long(cid:12)term debt . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . Total stockholders(cid:89) equity . . . . . . . . . . . . . . . (cid:4)In t(cid:55)(cid:62)u(cid:66)an(cid:51)(cid:66)(cid:5) (cid:4) 1,22(cid:22),002 (cid:4) 1,352,(cid:22)41 (cid:4) 1,403,5(cid:21)2 (cid:4) 2,2(cid:21)(cid:23),534 (cid:4) 1,34(cid:22),155 (cid:21)0(cid:22),991 (cid:21),(cid:23)24,3(cid:21)(cid:23) 1(cid:23)(cid:23),3(cid:23)(cid:23) 1,(cid:21)0(cid:21),019 5,21(cid:23),349 1,143,(cid:22)04 (cid:22),121,3(cid:21)2 4(cid:21)(cid:21),(cid:22)91 1,90(cid:23),959 5,212,403 520,0(cid:21)(cid:21) (cid:22),10(cid:23),931 2(cid:22)9,231 1,5(cid:23)(cid:23),003 5,520,92(cid:23) (cid:22)20,3(cid:22)9 (cid:21),(cid:23)(cid:21)4,501 393,540 1,(cid:22)(cid:21)5,(cid:23)04 5,09(cid:23),(cid:21)9(cid:22) (cid:23)11,50(cid:21) (cid:22),515,(cid:21)(cid:23)9 4(cid:22)1,(cid:21)9(cid:22) 2,41(cid:23),922 5,09(cid:21),(cid:22)(cid:21)(cid:22) 52 Ite(cid:60) (cid:18). (cid:24)a(cid:48)a(cid:41)(cid:39)m(cid:39)(cid:48)(cid:54)(cid:62)(cid:53) (cid:16)(cid:43)(cid:53)(cid:37)u(cid:53)(cid:53)(cid:43)o(cid:48) a(cid:48)(cid:38) (cid:13)(cid:48)a(cid:46)y(cid:53)(cid:43)(cid:53) o(cid:40) F(cid:43)(cid:48)a(cid:48)(cid:37)(cid:43)a(cid:46) (cid:15)o(cid:48)(cid:38)(cid:43)(cid:54)(cid:43)o(cid:48) a(cid:48)(cid:38) (cid:29)(cid:39)(cid:53)u(cid:46)(cid:54)(cid:53) o(cid:40) (cid:26)(cid:50)(cid:39)ra(cid:54)(cid:43)o(cid:48)(cid:53) The following discussion and analysis of our financial condition and results of operations should be read in con(cid:61)unction with our consolidated financial statements and the related notes thereto included in this Annual Report on Form 10(cid:12)K. In addition to historical financial information, the following discussion and analysis contains forward(cid:12)looking statements that involve risks, uncertainties, and assumptions as described under the (cid:87)Note Regarding Forward(cid:12)Looking Statements(cid:88) that appears earlier in this Annual Report on Form 10(cid:12)K. Our actual results could differ materially from those anticipated by these forward(cid:12)looking statements as a result of many factors, including those discussed under Item 1A. (cid:87)Risk Factors,(cid:88) and elsewhere in this Annual Report on Form 10(cid:12)K. This discussion and analysis does not address certain items in respect of the year ended December 31, 201(cid:23) in reliance on amendments to disclosure requirements adopted by the SEC in 2019. See Item (cid:22). (cid:87)Management(cid:89)s Discussion and Analysis of Financial Condition and Results of Operations(cid:88) in our Annual Report on Form 10(cid:12)K for the year ended December 31, 2019 for comparative discussions of our results of operations and liquidity and capital resources for the years ended December 31, 2019 and 201(cid:23). E(cid:71)e(cid:50)uti(cid:69)e O(cid:69)er(cid:69)ie(cid:70) We are a leading global provider of P(cid:48) solar energy solutions. We design, manufacture, and sell P(cid:48) solar modules with an advanced thin film semiconductor technology and also develop and sell P(cid:48) solar power systems that primarily use the modules we manufacture. Additionally, in certain markets we provide O(cid:6)M services to system owners. We have substantial, ongoing R(cid:6)D efforts focused on various technology innovations. We are the world(cid:89)s largest thin film P(cid:48) solar module manufacturer and one of the world(cid:89)s largest P(cid:48) solar module manufacturers. Certain of our financial results and other key operational developments for the year ended December 31, 2020 include the following: (cid:82) (cid:82) (cid:82) (cid:82) Net sales for 2020 decreased by 11(cid:5) to (cid:4)2.(cid:22) billion compared to (cid:4)3.1 billion in 2019. The decrease in net sales was primarily attributable to the completion of substantially all construction activities at the Sun Streams, Phoebe, Sunshine (cid:48)alley, Rosamond, Seabrook, and Lake Hancock pro(cid:61)ects in 2019, the sale of the Beryl and Little Bear pro(cid:61)ects in 2019, and lower construction activities at the GA Solar 4 pro(cid:61)ect in the current period, partially offset by the sale of the Ishikawa, American Kings, Miyagi, Anamizu, Tungabhadra, and Anantapur pro(cid:61)ects in 2020 and an increase in the volume of modules sold to third parties. Gross profit increased (cid:22).2 percentage points to 25.1(cid:5) during 2020 from 1(cid:22).9(cid:5) during 2019 primarily due to higher gross profit on third(cid:12)party module sales and improved throughput of our manufacturing facilities from the successful ramp of various Series (cid:21) manufacturing lines, partially offset by the higher benefit from reductions to our product warranty liability in the prior period and an impairment loss for certain module manufacturing equipment. During late 2020, we completed the capacity expansion of our manufacturing facility in Perrysburg, Ohio. As of December 31, 2020 we had (cid:21).3 GWDC of total installed Series (cid:21) nameplate production capacity across all our facilities. We produced (cid:21).1 GWDC of solar modules during 2020, which represented a 59(cid:5) increase in Series (cid:21) module production from 2019. The increase in Series (cid:21) production was primarily driven by the production capacity added in 2019 at our second facility in Ho Chi Minh City, (cid:48)ietnam and our facility in Lake Township, Ohio as well as higher throughput at various facilities. We expect to produce between (cid:22).4 GWDC and (cid:22).(cid:21) GWDC of Series (cid:21) modules during 2021. In response to the CO(cid:48)ID(cid:12)19 pandemic, governmental authorities have recommended or ordered the limitation or cessation of certain business or commercial activities in (cid:61)urisdictions in which we operate, including the United States, Malaysia, and (cid:48)ietnam. At this time, such limitations have had limited effect on our Series (cid:21) manufacturing facilities. However, these orders are sub(cid:61)ect to continuous revision, and our 53 (cid:82) (cid:82) (cid:82) (cid:82) understanding of the applicability of these orders and any potential exemptions may change at any time. To enable the continuity of our operations, we have implemented a wide range of safety measures intended to inhibit the spread of CO(cid:48)ID(cid:12)19 at our manufacturing, administrative, and other sites and facilities. Following an evaluation of the long(cid:12)term cost structure, competitiveness, and risk(cid:12)ad(cid:61)usted returns of our O(cid:6)M services business, we received an offer to purchase certain portions of the business and determined it is in the best interest of our stockholders to pursue this transaction. As a result, in August 2020 we entered into an agreement with Clairvest for the sale of our North American O(cid:6)M operations. The completion of the transaction is contingent on a number of closing conditions, including the receipt of certain third(cid:12)party consents and other customary closing conditions. Assuming satisfaction of such closing conditions, we expect the sale to be completed in the first half of 2021. Following an evaluation of the long(cid:12)term cost structure, competitiveness, and risk(cid:12)ad(cid:61)usted returns of our U.S. pro(cid:61)ect development business, we have determined it is in the best interest of our stockholders to pursue the sale of this business. On January 24, 2021, we entered into an agreement with OMERS for the sale of our U.S. pro(cid:61)ect development operations, which comprises the business of developing, contracting for the construction of, and selling utility(cid:12)scale P(cid:48) solar power systems. The transaction includes our approximately 10 GWAC utility(cid:12)scale solar pro(cid:61)ect pipeline, including the advanced(cid:12)stage Horizon, Madison, Ridgely, Rabbitbrush, and Oak Trail pro(cid:61)ects that are expected to commence construction in the next two years(cid:26) the 30 MWAC Barilla Solar pro(cid:61)ect, which is operational(cid:26) and certain other equipment. In addition, OMERS has agreed to certain module purchase commitments. The completion of the transaction is contingent on a number of closing conditions, including the receipt of regulatory approval from FERC, the expiration of the mandatory waiting period under U.S. antitrust laws, a review of the transaction by CFIUS, and other customary closing conditions. Assuming satisfaction of such closing conditions, we expect the sale to be completed in the first half of 2021. In January 2020, we entered into a Memorandum of Understanding ((cid:87)MOU(cid:88)) to settle a class action lawsuit filed in 2012 in the United States District Court for the District of Arizona (hereafter (cid:87)Arizona District Court(cid:88)) against the Company and certain of our current and former officers and directors (the (cid:87)Class Action(cid:88)). Pursuant to the MOU, we paid a total of (cid:4)350 million to settle the claims brought on behalf of all persons who purchased or otherwise acquired the Company(cid:89)s shares during a specified period, in exchange for mutual releases and a dismissal with pre(cid:61)udice of the complaint upon court approval of the settlement. The settlement contained no admission of liability, wrongdoing, or responsibility by any of the parties. The Arizona District Court entered an order in June 2020 that granted final approval of the settlement and dismissed the Class Action with pre(cid:61)udice. In June 2020, we entered into an agreement in principle to settle certain claims filed in 2015 in the Arizona District Court by putative stockholders that opted out of the Class Action (the (cid:87)Opt(cid:12)Out Action(cid:88)). In July 2020, the parties executed a definitive settlement agreement pursuant to which we agreed to pay a total of (cid:4)19 million in exchange for mutual releases and a dismissal with pre(cid:61)udice of the Opt(cid:12)Out Action. The agreement contained no admission of liability, wrongdoing, or responsibility by any of the parties. In July 2020, First Solar funded the settlement and the parties filed a (cid:61)oint stipulation of dismissal. In September 2020, the Arizona District Court entered an order dismissing the case with pre(cid:61)udice. (cid:24)ar(cid:45)(cid:39)(cid:54) (cid:26)(cid:56)(cid:39)r(cid:56)(cid:43)(cid:39)(cid:57) The solar industry continues to be characterized by intense pricing competition, both at the module and system levels. In particular, module average selling prices in many global markets have declined in recent years and are expected to continue to decline in the future. Furthermore, the CO(cid:48)ID(cid:12)19 pandemic has adversely affected certain purchasers of modules and systems, which may result in additional pressure on demand and average selling prices. In the aggregate, we believe manufacturers of solar cells and modules have significant installed production capacity, relative to global demand, and the ability for additional capacity expansion. Accordingly, we believe the solar 54 industry may from time to time experience periods of structural imbalance between supply and demand (i.e., where production capacity exceeds global demand), and that such periods will also put pressure on pricing, which may be exacerbated by the CO(cid:48)ID(cid:12)19 pandemic(cid:89)s disruption of the global economy. Additionally, intense competition at the system level may result in an environment in which pricing falls rapidly, thereby potentially increasing demand for solar energy solutions but constraining the ability for pro(cid:61)ect developers and diversified module manufacturers to sustain meaningful and consistent profitability. In light of such market realities, we continue to focus on our strategies and points of differentiation, which include our advanced module technology, our manufacturing process, our diversified capabilities, our financial viability, and the sustainability advantage of our modules and systems. Global solar markets continue to expand and develop, in part aided by demand elasticity resulting from declining average selling prices, both at the module and system levels, which have promoted the widespread adoption of solar energy. As a result of such market opportunities, we are expanding our manufacturing capacity and developing solar pro(cid:61)ects in certain markets as we execute on our utility(cid:12)scale pro(cid:61)ect pipeline. See the tables under (cid:87)Management(cid:89)s Discussion and Analysis of Financial Condition and Results of Operations (cid:85) Systems Pro(cid:61)ect Pipeline(cid:88) for additional information about pro(cid:61)ects within our advanced(cid:12)stage pipeline. Although we expect a meaningful portion of our future consolidated net sales, operating income, and cash flows to be derived from such pro(cid:61)ects, we expect third(cid:12) party module sales to continue to have a more significant impact on our operating results as we expand capacity and leverage the benefits of our Series (cid:21) module technology. Lower industry module and system pricing is expected to contribute to diversification in global electricity generation and further demand for solar energy. Over time, however, declining average selling prices may adversely affect our results of operations to the extent we have not already entered into contracts for future module or system sales. Our results of operations could also be adversely affected if competitors reduce pricing to levels below their costs, bid aggressively low prices for module sale agreements or PPAs, or are able to operate at minimal or negative operating margins for sustained periods of time. For certain of our competitors, such actions may be enabled by their direct or indirect access to sovereign capital or other forms of state(cid:12)owned support. In certain markets in California and elsewhere, an oversupply imbalance at the grid level may reduce short(cid:12)to(cid:12)medium term demand for new solar installations relative to prior years, lower PPA pricing, and lower margins on module and system sales to such markets. However, we believe the effects of such imbalance can be mitigated by modern solar power plants and energy storage solutions that offer a flexible operating profile, thereby promoting greater grid stability and enabling a higher penetration of solar energy. We continue to address these uncertainties, in part, by executing on our module technology improvements, partnering with grid operators and utility companies, and implementing certain other cost reduction initiatives. We face intense competition from manufacturers of crystalline silicon solar modules and developers of solar power pro(cid:61)ects. Solar module manufacturers compete with one another on price and on several module value attributes, including wattage (through a larger form factor or an improved conversion efficiency), energy yield, and reliability, and developers of systems compete on various factors such as net present value, return on equity, and LCOE. Many crystalline silicon cell and wafer manufacturers have transitioned from lower efficiency BSF multi(cid:12)crystalline cells (the legacy technology against which we have generally competed) to higher efficiency PERC mono(cid:12)crystalline cells at competitive cost structures. Additionally, while conventional solar modules, including the solar modules we produce, are monofacial, meaning their ability to produce energy is a function of direct and diffuse irradiance on their front side, certain manufacturers of mono(cid:12)crystalline PERC modules offer bifacial modules that also capture diffuse irradiance on the back side of a module. The cost effective manufacture of bifacial PERC modules has been enabled, in part, by the expansion of inexpensive crystal growth and diamond wire saw capacity in China. Bifaciality compromises nameplate efficiency, but by converting both front and rear side irradiance, such technology may improve the overall energy production of a module relative to nameplate efficiency when applied in certain applications, which, after considering the incremental BoS and other costs, could potentially lower the overall LCOE of a system when compared to systems using conventional solar modules, including the modules we produce. We believe we are among the lowest cost module manufacturers in the solar industry on a module cost per watt basis, based on publicly available information. This cost competitiveness allows us to compete favorably in markets 55 thin(cid:12)film semiconductor where pricing for modules and systems is highly competitive. Our cost competitiveness is based in large part on our advanced technology, module wattage (or conversion efficiency), proprietary manufacturing process (which enables us to produce a CdTe module in a matter of hours using a continuous and highly automated industrial manufacturing process, as opposed to a batch process), and our focus on operational excellence. In addition, our CdTe modules use approximately 1(cid:12)2(cid:5) of the amount of semiconductor material that is used to manufacture conventional crystalline silicon solar modules. The cost of polysilicon is a significant driver of the manufacturing cost of crystalline silicon solar modules, and the timing and rate of change in the cost of silicon feedstock and polysilicon could lead to changes in solar module pricing levels. In recent years, polysilicon consumption per cell has been reduced through various initiatives, such as the adoption of diamond wire saw technology, which have contributed to declines in our relative manufacturing cost competitiveness over conventional crystalline silicon module manufacturers. In terms of energy yield, in many climates our CdTe solar modules provide an energy production advantage over crystalline silicon solar modules of equivalent efficiency rating. For example, our CdTe solar modules provide a superior temperature coefficient, which results in stronger system performance in typical high insolation climates as the ma(cid:61)ority of a system(cid:89)s generation, on average, occurs when module temperatures are well above 25(cid:80)C (standard test conditions). In addition, our CdTe solar modules provide a superior spectral response in humid environments where atmospheric moisture alters the solar spectrum relative to laboratory standards. Our CdTe solar modules also provide a better partial shading response than conventional crystalline silicon solar modules, which may experience significantly lower energy generation than CdTe solar modules when partial shading occurs. As a result of these and other factors, our P(cid:48) solar modules typically produce more annual energy in real world field conditions than conventional modules with the same nameplate capacity. Furthermore, our thin(cid:12)film CdTe semiconductor technology is immune to cell cracking and its resulting power output loss, a common failure often observed in crystalline silicon modules caused by poor manufacturing, handling, weather, or other conditions. While our modules and systems are generally competitive in cost, reliability, and performance attributes, there can be no guarantee such competitiveness will continue to exist in the future to the same extent or at all. Any declines in the competitiveness of our products could result in further declines in the average selling prices of our modules and systems and additional margin compression. We continue to focus on enhancing the competitiveness of our solar modules and systems by accelerating progress along our module technology and cost reduction roadmaps. (cid:15)(cid:39)r(cid:54)a(cid:43)(cid:48) (cid:31)r(cid:39)(cid:48)(cid:38)(cid:53) a(cid:48)(cid:38) (cid:32)(cid:48)(cid:37)(cid:39)r(cid:54)a(cid:43)(cid:48)(cid:54)(cid:43)(cid:39)(cid:53) We believe that our business, financial condition, and results of operations may be favorably or unfavorably impacted by the following trends and uncertainties. See Item 1A. (cid:87)Risk Factors(cid:88) and elsewhere in this Annual Report on Form 10(cid:12)K for discussions of other risks that may affect us. Our long(cid:12)term strategic plans are focused on our goal to create long(cid:12)term shareholder value through a balance of growth, profitability, and liquidity. In executing such plans, we are focusing on providing utility(cid:12)scale P(cid:48) solar energy solutions in key geographic markets that we believe have a compelling need for mass(cid:12)scale P(cid:48) solar electricity, including markets throughout the United States, Japan, Europe, India, and certain other strategic markets. While these markets are expected to exhibit strong long(cid:12)term demand for solar energy, the economic disruption caused by the CO(cid:48)ID(cid:12)19 pandemic has adversely affected near(cid:12)term demand for electricity at the grid level. As a result, such temporary decline in load may adversely affect demand for specific forms of generation, such as our P(cid:48) solar energy solutions, depending on the severity and duration of the economic disruption. Given these market dynamics, we continue to focus on opportunities in which our P(cid:48) solar energy solutions compete directly with traditional forms of energy generation on an LCOE or similar basis, or complement such generation offerings. These opportunities include the retirement and replacement of aging fossil fuel(cid:12)based generation resources with utility(cid:12) scale P(cid:48) solar energy solutions. For example, cumulative global retirements of coal generation plants are expected to approximate 900 GWDC by 2040, representing a significant increase in the potential market for solar energy. 5(cid:21) This focus on our core module and utility(cid:12)scale offerings exists within a current market environment that includes rooftop and distributed generation solar, particularly in the United States. While it is unclear how rooftop and distributed generation solar might impact our core utility(cid:12)scale based offerings over the next several years, we believe that utility(cid:12)scale solar will continue to be a compelling offering for companies with technology and cost leadership and will continue to represent an increasing portion of the overall electricity generation mix. However, our module offerings in certain international markets may be driven, in part, by future demand for rooftop and distributed generation solar solutions. Our ability to provide utility(cid:12)scale offerings on economically attractive terms depends, in part, on market factors outside our control, such as the availability of debt and/or equity financing (including, in the United States, tax equity financing), interest rate fluctuations, domestic or international trade policies, and government support programs. Adverse changes in these factors could increase the cost of utility(cid:12)scale systems, which could reduce demand for such systems and limit the number of potential buyers. For example, we generally sell pro(cid:61)ects we have developed within our systems business to purchasers that depend on financing to fund the initial capital expenditures required to develop, build, and/or purchase a system. Although governments and central banks around the world have implemented significant measures to support capital markets, the economic disruption caused by the CO(cid:48)ID(cid:12)19 pandemic may result in a long(cid:12)term tightening of the supply of capital in global financial markets (including, in the United States, a reduction in total tax equity availability). A reduction in the supply of pro(cid:61)ect debt or equity financing (including, in the United States, tax equity financing) caused by the CO(cid:48)ID(cid:12)19 pandemic could make it difficult for our customers to secure the financing necessary to develop, build, purchase, or install systems. Similarly, purchasers of modules may cease or significantly reduce business operations, cease or delay module procurement, encounter an inability to obtain financing, including due to a reduction in the supply of pro(cid:61)ect debt financing or equity investments (including, in the United States, tax equity financing), conserve capital resources, or take other actions in response to the CO(cid:48)ID(cid:12)19 pandemic, which may reduce demand and average selling prices for our modules. In certain markets, demand for our utility(cid:12)scale offerings may be affected by specific regulations or policies of governmental bodies or utility regulators. For example, in June 2020, the Japanese legislature enacted an amendment to the Electricity Business Law Enforcement Order for the Ministry of Economy, Trade and Industry of Japan which, among other things, is expected to invalidate the feed(cid:12)in(cid:12)tariff certificates for pro(cid:61)ects that fail to achieve construction plan acceptance, submit an interconnection application, and/or achieve commercial operation within a set period of time following dates specified in their respective certificates. The amendment, which becomes effective in April 2022, applies to all pro(cid:61)ects regardless of generation type and is intended to release grid capacity reserved for delayed pro(cid:61)ects to enable other newly developed pro(cid:61)ects to utilize such capacity at a lower cost of electricity to consumers. The deadline by which a pro(cid:61)ect must achieve construction plan acceptance, submit an interconnection application, and/or achieve commercial operation varies by pro(cid:61)ect, but is no earlier than March 2023. Any deadlines that precede the expected construction plan acceptance and/or commercial operation dates of our various pro(cid:61)ects in Japan could adversely affect the value of such pro(cid:61)ects and our ability to secure any related pro(cid:61)ect financing. We intend to focus our resources in those markets and energy applications in which solar power can be a least(cid:12)cost, best(cid:12)fit energy solution, particularly in regions with significant current or pro(cid:61)ected electricity demand, relatively high existing electricity prices, strong demand for renewable energy generation, and high solar resources. As a result, we closely evaluate and monitor the appropriate level of resources required to support such markets and their associated sales opportunities. We have dedicated, and intend to continue to dedicate, significant capital and human resources to reduce the total installed cost of P(cid:48) solar energy and to ensure that our solutions integrate well into the overall electricity ecosystem of each specific market. Creating or maintaining a market position in certain strategically targeted markets and energy applications also requires us to adapt to new and changing market conditions, including changes in the market set of potential buyers of our modules and solar pro(cid:61)ects. Market environments with few potential pro(cid:61)ect buyers and a higher cost of capital would generally exert downward pressure on the potential revenue from such offerings, whereas, conversely, market environments with many potential pro(cid:61)ect buyers and a lower cost of capital would likely have a favorable 5(cid:22) impact on the potential revenue from such offerings. For example, the emergence of utility(cid:12)owned generation has increased the number of potential pro(cid:61)ect buyers as such utility customers benefit from a potentially low cost of capital available through rate(cid:12)based utility investments. Given their long(cid:12)term ownership profile, utility(cid:12)owned generation customers typically seek to partner with diversified and stable companies that can provide a broad spectrum of utility(cid:12)scale generation solutions, including reliable P(cid:48) solar technology, thereby mitigating their long(cid:12) term ownership risks. On occasion, we may elect to develop partially contracted or uncontracted systems for which there is a partial or no PPA with an off(cid:12)taker, such as a utility, but rather an intent to sell some portion of the electricity produced by the system on an open contract basis until the system is sold. Expected revenue from pro(cid:61)ects without a PPA for the full off(cid:12)take of the system is sub(cid:61)ect to greater variability and uncertainty based on market factors and is typically lower than pro(cid:61)ects with a PPA for the full off(cid:12)take of the system. Furthermore, all system pricing is affected by the pricing of energy to be sold on an open contract basis following the termination of the PPA (i.e., merchant pricing curves), and changes in market assumptions regarding future open contract sales, including potential changes in energy demand caused by the CO(cid:48)ID(cid:12)19 pandemic, may also result in significant variability and uncertainty in the value of our systems pro(cid:61)ects. We continually evaluate forecasted global demand, competition, and our addressable market and seek to effectively balance manufacturing capacity with market demand and the nature and extent of our competition. We continue to increase the nameplate production capacity of our existing manufacturing facilities by improving our production throughput, increasing module wattage (or conversion efficiency), and improving manufacturing yield losses. As we evaluate the potential for future capacity expansion, we may also seek to further diversify our manufacturing presence, although we have made no decisions to do so at this time. Such additional capacity, and any other potential investments to add or otherwise modify our existing manufacturing capacity in response to market demand and competition, may require significant internal and possibly external sources of capital, and may be sub(cid:61)ect to certain risks and uncertainties described in Item 1A. (cid:87)Risk Factors,(cid:88) including those described under the headings (cid:87)Our future success depends on our ability to effectively balance manufacturing production with market demand, convert existing production facilities to support new product lines, decrease our cost per watt, and, when necessary, continue to build new manufacturing plants over time in response to market demand, all of which are sub(cid:61)ect to risks and uncertainties(cid:88) and (cid:87)If any future production lines are not built in line with committed schedules, it may adversely affect our future growth plans. If any future production lines do not achieve operating metrics similar to our existing production lines, our solar modules could perform below expectations and cause us to lose customers.(cid:88) In response to the CO(cid:48)ID(cid:12)19 pandemic, governmental authorities have recommended or ordered the limitation or cessation of certain business or commercial activities in (cid:61)urisdictions in which we do business or have operations. While some of these orders permit the continuation of essential business operations, or permit the performance of minimum business activities, these orders are sub(cid:61)ect to continuous revision or may be revoked or superseded, or our understanding of the applicability of these orders and exemptions may change at any time. In addition, due to contraction of the virus, or concerns about becoming ill from the virus, we may experience reductions in the availability of our operational workforce, such as our manufacturing personnel. As a result, we may at any time be ordered by governmental authorities, or we may determine, based on our understanding of the recommendations or orders of governmental authorities or the availability of our personnel, that we have to curtail or cease business operations or activities altogether, including manufacturing, fulfillment, pro(cid:61)ect development, construction, operating or maintenance operations, or research and development activities. At this time, such limitations have had a limited effect on our manufacturing facilities and certain pro(cid:61)ect construction activities, and we have implemented a wide range of safety measures intended to enable the continuity of our operations and inhibit the spread of CO(cid:48)ID(cid:12)19 at our manufacturing, administrative, and other sites and facilities, including those in the United States, Malaysia, and (cid:48)ietnam. To address the near(cid:12)term business disruption caused by the CO(cid:48)ID(cid:12)19 pandemic, many governments have proposed policies or support programs intended to stimulate their respective economies. Such support programs may include additional incentives for renewable energy pro(cid:61)ects, including P(cid:48) solar power systems, over several years. While we 5(cid:23) compete in many markets that do not require solar(cid:12)specific government subsidies or support programs, our net sales and profits remain sub(cid:61)ect to variability based on the availability and size of government subsidies and economic incentives. Sy(cid:53)(cid:54)(cid:39)m(cid:53) (cid:27)ro(cid:44)(cid:39)(cid:37)(cid:54) (cid:27)(cid:43)(cid:50)(cid:39)(cid:46)(cid:43)(cid:48)(cid:39) The following tables summarize, as of February 25, 2021, our approximately 1.3 GWAC advanced(cid:12)stage pro(cid:61)ect pipeline. The actual volume of modules installed in our pro(cid:61)ects will be greater than the pro(cid:61)ect size in MWAC as module volumes required for a pro(cid:61)ect are based upon MWDC, which will be greater than the MWAC size pursuant to a DC(cid:12)AC ratio typically ranging from 1.1 to 1.4. Such ratio varies across different pro(cid:61)ects due to many factors, including PPA pricing and the location, design, and costs of the system. Pro(cid:61)ects are typically removed from our advanced(cid:12)stage pro(cid:61)ect pipeline tables below once we substantially complete construction of the pro(cid:61)ect and after substantially all of the associated pro(cid:61)ect revenue is recognized. A pro(cid:61)ect, or a portion of a pro(cid:61)ect, may also be removed from the tables below in the event the pro(cid:61)ect is not able to be sold due to the changing economics of the pro(cid:61)ect or other factors or we decide to temporarily own and operate the pro(cid:61)ect based on strategic opportunities or market factors. (cid:38)r(cid:62)(cid:57)e(cid:50)t(cid:66) un(cid:51)er Sale(cid:66) Agree(cid:60)ent(cid:66) The following table includes uncompleted sold pro(cid:61)ects and pro(cid:61)ects under contracts sub(cid:61)ect to conditions precedent: (cid:38)r(cid:62)(cid:57)e(cid:50)t(cid:10)L(cid:62)(cid:50)ati(cid:62)n Horizon, Texas . . . . . . . . . . . . Madison, Ohio (1) . . . . . . . . . Ridgely, Tennessee . . . . . . . . . (cid:38)r(cid:62)(cid:57)e(cid:50)t Si(cid:73)e in (cid:35)(cid:45)AC 200 19(cid:21) (cid:48)erizon Communications 1(cid:22)(cid:22) (cid:38)(cid:38)A C(cid:62)ntra(cid:50)te(cid:51) (cid:38)artner (2) Tennessee (cid:48)alley Authority Sun Streams 2, Arizona . . . . . Rabbitbrush, California . . . . . Oak Trail, North Carolina . . . Total . . . . . . . . . . . . . . . . . 150 Microsoft Corporation 100 100 (cid:48)erizon Communications 923 (3) E(cid:71)(cid:63)e(cid:50)te(cid:51) (cid:47)ear Re(cid:69)enue Re(cid:50)(cid:62)gniti(cid:62)n (cid:45)ill (cid:24)e C(cid:62)(cid:60)(cid:63)lete(cid:51) (4) (4) (4) (cid:2) (cid:62)(cid:53) Re(cid:69)enue Re(cid:50)(cid:62)gni(cid:73)e(cid:51) a(cid:66) (cid:62)(cid:53) De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:13)(cid:11) (4) (4) (4) 2021 (5) (4) (4) (cid:86)(cid:5) (4) (4) Cu(cid:66)t(cid:62)(cid:60)er (4) (4) (4) (5) (4) (4) (cid:38)r(cid:62)(cid:57)e(cid:50)t(cid:66) (cid:70)it(cid:55) C(cid:62)n(cid:53)ir(cid:60)e(cid:51) O(cid:53)(cid:53)ta(cid:58)e Agree(cid:60)ent(cid:66) N(cid:62)t un(cid:51)er Sale(cid:66) Agree(cid:60)ent(cid:66) (cid:38)r(cid:62)(cid:57)e(cid:50)t(cid:10)L(cid:62)(cid:50)ati(cid:62)n Luz del Norte, Chile . . . . . . . . Sun Streams P(cid:48)S, Arizona . . . Kyoto, Japan . . . . . . . . . . . . . . (cid:38)r(cid:62)(cid:57)e(cid:50)t Si(cid:73)e in (cid:35)(cid:45)AC 141 (cid:21)5 3(cid:23) Japan (multiple locations) . . . Total . . . . . . . . . . . . . . . . . 1(cid:21)0 404 (cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86) (cid:38)(cid:38)A C(cid:62)ntra(cid:50)te(cid:51) (cid:38)artner ((cid:21)) ((cid:22)) Chubu Electric Power Company ((cid:23)) (1) Previously known as the Big Plain Solar pro(cid:61)ect (cid:38)ri(cid:60)ar(cid:72) (cid:38)er(cid:60)it(cid:66) O(cid:49)taine(cid:51) Yes Yes Yes E(cid:71)(cid:63)e(cid:50)te(cid:51) (cid:62)r A(cid:50)tual Su(cid:49)(cid:66)tantial C(cid:62)(cid:60)(cid:63)leti(cid:62)n (cid:47)ear 201(cid:21) 2022 2022 (cid:2) C(cid:62)(cid:60)(cid:63)lete a(cid:66) (cid:62)(cid:53) De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:13)(cid:11) 100(cid:5) (cid:23)(cid:5) 33(cid:5) Yes 2021/2023 22(cid:5) (2) 150 MWAC of the plant(cid:89)s capacity is contracted with Dow Pipeline Company(cid:26) remaining capacity to be sold on an open contract basis (3) Central Coast Community Energy (cid:85) (cid:21)0 MWAC and Silicon (cid:48)alley Clean Energy (cid:85) 40 MWAC 59 (4) Pro(cid:61)ect included in the sale of our U.S. pro(cid:61)ect development business. Refer to Item 1. (cid:87)Business (cid:85) Offerings and Capabilities(cid:88) for further information. (5) Contracted but not specified. Pro(cid:61)ect sale completed in February 2021. ((cid:21)) Approximately (cid:22)0 MWAC of the plant(cid:89)s capacity is contracted under various PPAs(cid:26) remaining capacity to be sold on an open contract basis ((cid:22)) The pro(cid:61)ect(cid:89)s PPA was terminated in February 2021. We continue to market the pro(cid:61)ect for sale. ((cid:23)) 11 MWAC has been contracted with Tokyo Electric Power Company. The remaining 149 MWAC has secured feed(cid:12)in(cid:12) tariff rights, and the related PPAs for such pro(cid:61)ects will be executed at a later date. Re(cid:66)ult(cid:66) (cid:62)(cid:53) O(cid:63)erati(cid:62)n(cid:66) The following table sets forth our consolidated statements of operations as a percentage of net sales for the years ended December 31, 2020, 2019, and 201(cid:23): Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Production start(cid:12)up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Litigation loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency (loss) income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other (expense) income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax benefit (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity in earnings, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S(cid:39)(cid:41)m(cid:39)(cid:48)(cid:54) (cid:26)(cid:56)(cid:39)r(cid:56)(cid:43)(cid:39)(cid:57) (cid:47)ear(cid:66) En(cid:51)e(cid:51) De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:19) 100.0 (cid:5) (cid:22)4.9 (cid:5) 25.1 (cid:5) (cid:23).2 (cid:5) 3.5 (cid:5) 1.5 (cid:5) 0.2 (cid:5) 11.(cid:22) (cid:5) (0.2) (cid:5) 0.(cid:21) (cid:5) (0.9) (cid:5) (0.4) (cid:5) 4.0 (cid:5) (0.1) (cid:5) 14.(cid:22) (cid:5) 100.0 (cid:5) (cid:23)2.1 (cid:5) 1(cid:22).9 (cid:5) (cid:21).(cid:22) (cid:5) 3.2 (cid:5) 1.5 (cid:5) 11.9 (cid:5) (5.3) (cid:5) 0.1 (cid:5) 1.(cid:21) (cid:5) (0.9) (cid:5) 0.(cid:21) (cid:5) 0.2 (cid:5) (cid:86) (cid:5) (3.(cid:23)) (cid:5) 100.0 (cid:5) (cid:23)2.5 (cid:5) 1(cid:22).5 (cid:5) (cid:22).9 (cid:5) 3.(cid:23) (cid:5) 4.0 (cid:5) (cid:86) (cid:5) 1.(cid:23) (cid:5) (cid:86) (cid:5) 2.(cid:22) (cid:5) (1.2) (cid:5) 1.(cid:23) (cid:5) (0.2) (cid:5) 1.5 (cid:5) (cid:21).4 (cid:5) We operate our business in two segments. Our modules segment involves the design, manufacture, and sale of CdTe solar modules to third parties, and our systems segment includes the development, construction contracting and management, operation, maintenance, and sale of P(cid:48) solar power systems, including any modules installed in such systems and any revenue from energy generated by such systems. (cid:25)(cid:39)(cid:54) (cid:53)a(cid:46)(cid:39)(cid:53) (cid:26)odu(cid:47)es (cid:16)usiness We generally price and sell our solar modules on a per watt basis. During 2020, Longroad Energy, NextEra Energy, and Softbank each accounted for more than 10(cid:5) of our modules business net sales, and the ma(cid:61)ority of our solar modules were sold to integrators and operators of systems in the United States and France. Substantially all of our modules business net sales during 2020 were denominated in U.S. dollars and Euro. We recognize revenue for module sales at a point in time following the transfer of control of the modules to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. The revenue recognition (cid:21)0 policies for module sales are further described in Note 2. (cid:87)Summary of Significant Accounting Policies(cid:88) to our consolidated financial statements. (cid:31)(cid:60)stems (cid:16)usiness During 2020, Goldman Sachs Renewable Power, SMFL Mirai Partners, and Mitsui (cid:6) Co. each accounted for more than 10(cid:5) of our systems business net sales, and the ma(cid:61)ority of our systems business net sales were in the United States and Japan. Substantially all of our systems business net sales during 2020 were denominated in U.S. dollars and Japanese yen. We recognize revenue for sales of solar power systems using cost based input methods, which result in revenue being recognized as work is performed based on the relationship between actual costs incurred compared to the total estimated costs for a given contract. We may also recognize revenue for the sale of a development pro(cid:61)ect, which excludes EPC services, or for the sale of a completed system when we enter into the associated sales contract with the customer. The revenue recognition policies for our systems business are further described in Note 2. (cid:87)Summary of Significant Accounting Policies(cid:88) to our consolidated financial statements. The following table shows net sales by reportable segment for the years ended December 31, 2020, 2019, and 201(cid:23): (cid:47)ear(cid:66) En(cid:51)e(cid:51) C(cid:55)ange (cid:4)D(cid:62)llar(cid:66) in t(cid:55)(cid:62)u(cid:66)an(cid:51)(cid:66)(cid:5) (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:19) (cid:13)(cid:11)(cid:13)(cid:11) (cid:62)(cid:69)er (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:20) (cid:62)(cid:69)er (cid:13)(cid:11)(cid:12)(cid:19) Modules . . . . . . . . . . . . . . . . . . . (cid:4) 1,(cid:22)3(cid:21),0(cid:21)0 (cid:4) 1,4(cid:21)0,11(cid:21) (cid:4) 502,001 (cid:4) 2(cid:22)5,944 19 (cid:5) (cid:4) 95(cid:23),115 191 (cid:5) Systems . . . . . . . . . . . . . . . . . . . 9(cid:22)5,2(cid:22)2 1,(cid:21)03,001 1,(cid:22)42,043 ((cid:21)2(cid:22),(cid:22)29) (39) (cid:5) (139,042) Net sales . . . . . . . . . . . . . . . . . . (cid:4) 2,(cid:22)11,332 (cid:4) 3,0(cid:21)3,11(cid:22) (cid:4) 2,244,044 (cid:4) (351,(cid:22)(cid:23)5) (11) (cid:5) (cid:4) (cid:23)19,0(cid:22)3 ((cid:23)) (cid:5) 3(cid:21) (cid:5) Net sales from our modules segment increased by (cid:4)2(cid:22)5.9 million in 2020 primarily due to a 21(cid:5) increase in the volume of watts sold, partially offset by a 2(cid:5) decrease in the average selling price per watt. Net sales from our systems segment decreased by (cid:4)(cid:21)2(cid:22).(cid:22) million in 2020 primarily due to the completion of substantially all construction activities at the Sun Streams, Phoebe, Sunshine (cid:48)alley, Rosamond, Seabrook, and Lake Hancock pro(cid:61)ects in 2019, the sale of the Beryl and Little Bear pro(cid:61)ects in 2019, and lower construction activities at the GA Solar 4 pro(cid:61)ect in the current period, partially offset by the sale of the Ishikawa, American Kings, Miyagi, Anamizu, Tungabhadra, and Anantapur pro(cid:61)ects in 2020. (cid:15)o(cid:53)(cid:54) o(cid:40) (cid:53)a(cid:46)(cid:39)(cid:53) (cid:26)odu(cid:47)es (cid:16)usiness Our modules business cost of sales includes the cost of raw materials and components for manufacturing solar modules, such as glass, transparent conductive coatings, CdTe and other thin film semiconductors, laminate materials, connector assemblies, edge seal materials, and frames. In addition, our cost of sales includes direct labor for the manufacturing of solar modules and manufacturing overhead, such as engineering, equipment maintenance, quality and production control, and information technology. Our cost of sales also includes depreciation of manufacturing plant and equipment, facility(cid:12)related expenses, environmental health and safety costs, and costs associated with shipping, warranties, and solar module collection and recycling (excluding accretion). (cid:31)(cid:60)stems (cid:16)usiness For our systems business, pro(cid:61)ect(cid:12)related costs include development costs (legal, consulting, transmission upgrade, interconnection, permitting, and other similar costs), EPC costs (consisting primarily of solar modules, inverters, electrical and mounting hardware, pro(cid:61)ect management and engineering, and construction labor), and site specific costs. (cid:21)1 The following table shows cost of sales by reportable segment for the years ended December 31, 2020, 2019, and 201(cid:23): (cid:47)ear(cid:66) En(cid:51)e(cid:51) C(cid:55)ange (cid:4)D(cid:62)llar(cid:66) in t(cid:55)(cid:62)u(cid:66)an(cid:51)(cid:66)(cid:5) (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:19) (cid:13)(cid:11)(cid:13)(cid:11) (cid:62)(cid:69)er (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:20) (cid:62)(cid:69)er (cid:13)(cid:11)(cid:12)(cid:19) Modules . . . . . . . . . . . . . . . . . . . (cid:4) 1,30(cid:21),929 (cid:4) 1,1(cid:22)0,03(cid:22) (cid:4) 552,4(cid:21)(cid:23) (cid:4) 13(cid:21),(cid:23)92 12 (cid:5) (cid:4) (cid:21)1(cid:22),5(cid:21)9 112 (cid:5) Systems . . . . . . . . . . . . . . . . . . . (cid:22)23,(cid:22)30 1,343,(cid:23)(cid:21)(cid:23) 1,299,399 ((cid:21)20,13(cid:23)) (4(cid:21)) (cid:5) 44,4(cid:21)9 Cost of sales . . . . . . . . . . . . . . . . (cid:4) 2,030,(cid:21)59 (cid:4) 2,513,905 (cid:4) 1,(cid:23)51,(cid:23)(cid:21)(cid:22) (cid:4) (4(cid:23)3,24(cid:21)) (19) (cid:5) (cid:4) (cid:21)(cid:21)2,03(cid:23) 3 (cid:5) 3(cid:21) (cid:5) (cid:5) of net sales . . . . . . . . . . . . . . . (cid:22)4.9 (cid:5) (cid:23)2.1 (cid:5) (cid:23)2.5 (cid:5) Cost of sales decreased (cid:4)4(cid:23)3.2 million, or 19(cid:5), and decreased (cid:22).2 percentage points as a percent of net sales when comparing 2020 with 2019. The decrease in cost of sales was driven by a (cid:4)(cid:21)20.1 million decrease in our systems segment cost of sales primarily due to the lower volume of pro(cid:61)ects under construction during the period. Such decrease in our systems segment cost of sales was partially offset by a (cid:4)13(cid:21).9 million increase in our modules segment cost of sales primarily as a result of the following: (cid:82) (cid:82) higher costs of (cid:4)24(cid:22).4 million from an increase in the volume of modules sold(cid:26) an impairment loss of (cid:4)1(cid:22).4 million for certain module manufacturing equipment, including framing and assembly tools, which were no longer compatible with our long(cid:12)term module technology roadmap(cid:26) (cid:82) manufacturing related charges of (cid:4)15.1 million associated with the ongoing CO(cid:48)ID(cid:12)19 pandemic(cid:26) and (cid:82) a reduction to our product warranty liability of (cid:4)(cid:23)0.0 million in 2019 due to revised module return rates(cid:26) partially offset by a reduction to our product warranty liability of (cid:4)19.(cid:22) million in 2020 due to lower(cid:12)than(cid:12)expected settlements for our older series of module technology and revisions to pro(cid:61)ected settlements(cid:26) lower under(cid:12)utilization and certain other charges associated with the initial ramp of certain Series (cid:21) manufacturing lines, which decreased cost of sales by (cid:4)(cid:21)1.(cid:22) million compared to 2019(cid:26) a reduction in our module collection and recycling liability of (cid:4)1(cid:23).9 million primarily due to changes to the estimated timing of cash flows associated with capital, labor, and maintenance costs and updates to certain valuation assumptions(cid:26) and continued module cost reductions, which decreased cost of sales by (cid:4)15(cid:22).2 million. (cid:82) (cid:82) (cid:82) (cid:82) (cid:19)ro(cid:53)(cid:53) (cid:50)ro(cid:40)(cid:43)(cid:54) Gross profit may be affected by numerous factors, including the selling prices of our modules and systems, our manufacturing costs, pro(cid:61)ect development costs, BoS costs, the capacity utilization of our manufacturing facilities, and foreign exchange rates. Gross profit may also be affected by the mix of net sales from our modules and systems businesses. The following table shows gross profit for the years ended December 31, 2020, 2019, and 201(cid:23): (cid:4)D(cid:62)llar(cid:66) in t(cid:55)(cid:62)u(cid:66)an(cid:51)(cid:66)(cid:5) (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:19) (cid:13)(cid:11)(cid:13)(cid:11) (cid:62)(cid:69)er (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:20) (cid:62)(cid:69)er (cid:13)(cid:11)(cid:12)(cid:19) Gross profit . . . . . . . . . . . . . . . . (cid:4) (cid:21)(cid:23)0,(cid:21)(cid:22)3 (cid:4) 549,212 (cid:4) 392,1(cid:22)(cid:22) (cid:4) 131,4(cid:21)1 24 (cid:5) (cid:4) 15(cid:22),035 40 (cid:5) (cid:5) of net sales . . . . . . . . . . . . . . . 25.1 (cid:5) 1(cid:22).9 (cid:5) 1(cid:22).5 (cid:5) (cid:47)ear(cid:66) En(cid:51)e(cid:51) C(cid:55)ange Gross profit increased (cid:22).2 percentage points to 25.1(cid:5) during 2020 from 1(cid:22).9(cid:5) during 2019 primarily due to higher gross profit on third(cid:12)party module sales and improved throughput of our manufacturing facilities from the successful ramp of various Series (cid:21) manufacturing lines, partially offset by the lower benefit from reductions to our product warranty liability and the impairment loss for certain module manufacturing equipment described above. (cid:21)2 S(cid:39)(cid:46)(cid:46)(cid:43)(cid:48)(cid:41)(cid:5) (cid:41)(cid:39)(cid:48)(cid:39)ra(cid:46) a(cid:48)(cid:38) a(cid:38)m(cid:43)(cid:48)(cid:43)(cid:53)(cid:54)ra(cid:54)(cid:43)(cid:56)(cid:39) Selling, general and administrative expense consists primarily of salaries and other personnel(cid:12)related costs, professional fees, insurance costs, and other business development and selling expenses. The following table shows selling, general and administrative expense for the years ended December 31, 2020, 2019, and 201(cid:23): (cid:4)D(cid:62)llar(cid:66) in t(cid:55)(cid:62)u(cid:66)an(cid:51)(cid:66)(cid:5) Selling, general and (cid:47)ear(cid:66) En(cid:51)e(cid:51) C(cid:55)ange (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:19) (cid:13)(cid:11)(cid:13)(cid:11) (cid:62)(cid:69)er (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:20) (cid:62)(cid:69)er (cid:13)(cid:11)(cid:12)(cid:19) administrative . . . . . . . . . . . (cid:4) 222,91(cid:23) (cid:4) 205,4(cid:22)1 (cid:4) 1(cid:22)(cid:21),(cid:23)5(cid:22) (cid:4) 1(cid:22),44(cid:22) (cid:23) (cid:5) (cid:4) 2(cid:23),(cid:21)14 1(cid:21) (cid:5) (cid:5) of net sales . . . . . . . . . . . . . . . (cid:23).2 (cid:5) (cid:21).(cid:22) (cid:5) (cid:22).9 (cid:5) Selling, general and administrative expense in 2020 increased compared to 2019 primarily due to higher charges for impairments of certain pro(cid:61)ect assets and an increase in professional fees, partially offset by lower pro(cid:61)ect development and travel expenses. (cid:29)(cid:39)(cid:53)(cid:39)ar(cid:37)(cid:42) a(cid:48)(cid:38) (cid:38)(cid:39)(cid:56)(cid:39)(cid:46)o(cid:50)m(cid:39)(cid:48)(cid:54) Research and development expense consists primarily of salaries and other personnel(cid:12)related costs(cid:26) the cost of products, materials, and outside services used in our R(cid:6)D activities(cid:26) and depreciation and amortization expense associated with R(cid:6)D specific facilities and equipment. We maintain a number of programs and activities to improve our technology and processes in order to enhance the performance and reduce the costs of our solar modules. The following table shows research and development expense for the years ended December 31, 2020, 2019, and 201(cid:23): (cid:4)D(cid:62)llar(cid:66) in t(cid:55)(cid:62)u(cid:66)an(cid:51)(cid:66)(cid:5) (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:19) (cid:13)(cid:11)(cid:13)(cid:11) (cid:62)(cid:69)er (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:20) (cid:62)(cid:69)er (cid:13)(cid:11)(cid:12)(cid:19) Research and development . . . . (cid:4) 93,(cid:22)3(cid:23) (cid:4) 9(cid:21),(cid:21)11 (cid:4) (cid:23)4,4(cid:22)2 (cid:4) (2,(cid:23)(cid:22)3) (3) (cid:5) (cid:4) 12,139 14 (cid:5) (cid:5) of net sales . . . . . . . . . . . . . . . 3.5 (cid:5) 3.2 (cid:5) 3.(cid:23) (cid:5) (cid:47)ear(cid:66) En(cid:51)e(cid:51) C(cid:55)ange Research and development expense in 2020 decreased compared to 2019 primarily as a result of lower employee compensation expense due to reductions in R(cid:6)D headcount for our systems business, partially offset by increased material and module testing costs. (cid:27)ro(cid:38)u(cid:37)(cid:54)(cid:43)o(cid:48) (cid:53)(cid:54)ar(cid:54)-u(cid:50) Production start(cid:12)up expense consists primarily of employee compensation and other costs associated with operating a production line before it is qualified for full production, including the cost of raw materials for solar modules run through the production line during the qualification phase and applicable facility related costs. Costs related to equipment upgrades and implementation of manufacturing process improvements are also included in production start(cid:12)up expense as well as costs related to the selection of a new site, related legal and regulatory costs, and costs to maintain our plant replication program to the extent we cannot capitalize these expenditures. In general, we expect production start(cid:12)up expense per production line to be higher when we build an entirely new manufacturing facility compared with the addition or replacement of production lines at an existing manufacturing facility, primarily due to the additional infrastructure investment required when building an entirely new facility. (cid:21)3 The following table shows production start(cid:12)up expense for the years ended December 31, 2020, 2019, and 201(cid:23): (cid:4)D(cid:62)llar(cid:66) in t(cid:55)(cid:62)u(cid:66)an(cid:51)(cid:66)(cid:5) (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:19) (cid:13)(cid:11)(cid:13)(cid:11) (cid:62)(cid:69)er (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:20) (cid:62)(cid:69)er (cid:13)(cid:11)(cid:12)(cid:19) Production start(cid:12)up . . . . . . . . . . (cid:4) 40,52(cid:23) (cid:4) 45,915 (cid:4) 90,(cid:22)35 (cid:4) (5,3(cid:23)(cid:22)) (12) (cid:5) (cid:4) (44,(cid:23)20) (49) (cid:5) (cid:5) of net sales . . . . . . . . . . . . . . . 1.5 (cid:5) 1.5 (cid:5) 4.0 (cid:5) (cid:47)ear(cid:66) En(cid:51)e(cid:51) C(cid:55)ange During 2020, we incurred production start(cid:12)up expense for the transition to Series (cid:21) module manufacturing at our second facility in Kulim, Malaysia and the capacity expansion of our manufacturing facility in Perrysburg, Ohio. During 2019, we incurred production start(cid:12)up expense at our new facility in Lake Township, Ohio and our second facility in Ho Chi Minh City, (cid:48)ietnam, which commenced commercial production in early 2019. (cid:23)(cid:43)(cid:54)(cid:43)(cid:41)a(cid:54)(cid:43)o(cid:48) (cid:46)o(cid:53)(cid:53) The following table shows litigation loss for the years ended December 31, 2020, 2019, and 201(cid:23): (cid:4)D(cid:62)llar(cid:66) in t(cid:55)(cid:62)u(cid:66)an(cid:51)(cid:66)(cid:5) (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:19) (cid:13)(cid:11)(cid:13)(cid:11) (cid:62)(cid:69)er (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:20) (cid:62)(cid:69)er (cid:13)(cid:11)(cid:12)(cid:19) Litigation loss . . . . . . . . . . . . . . (cid:4) (cid:21),000 (cid:4) 3(cid:21)3,000 (cid:4) (cid:86) (cid:4) (35(cid:22),000) (9(cid:23)) (cid:5) (cid:4) 3(cid:21)3,000 100 (cid:5) (cid:5) of net sales . . . . . . . . . . . . . . . 0.2 (cid:5) 11.9 (cid:5) (cid:86) (cid:5) (cid:47)ear(cid:66) En(cid:51)e(cid:51) C(cid:55)ange In January 2020, we entered into an MOU to settle a class action lawsuit filed in 2012 in the Arizona District Court against the Company and certain of our current and former officers and directors. Pursuant to the MOU, we agreed to pay a total of (cid:4)350 million to settle the claims brought on behalf of all persons who purchased or otherwise acquired the Company(cid:89)s shares during a specified period, in exchange for mutual releases and a dismissal with pre(cid:61)udice of the complaint upon court approval of the settlement. The settlement contains no admission of liability, wrongdoing, or responsibility by any of the parties. As a result of the entry into the MOU, we accrued a loss for the above(cid:12)referenced settlement in 2019, and paid the (cid:4)350 million settlement in January 2020. In June 2020, the Arizona District Court entered an order that granted final approval of the settlement and dismissed the Class Action with pre(cid:61)udice. In June 2020, we entered into an agreement in principle to settle the claims in the Opt(cid:12)Out Action filed in 2015 in the Arizona District Court by putative stockholders that opted out of the Class Action. In July 2020, the parties executed a definitive settlement agreement pursuant to which we agreed to pay a total of (cid:4)19 million in exchange for mutual releases and a dismissal with pre(cid:61)udice of the Opt(cid:12)Out Action. The agreement contains no admission of liability, wrongdoing, or responsibility by any of the parties. In July 2020, First Solar funded the settlement and the parties filed a (cid:61)oint stipulation of dismissal. In September 2020, the Arizona District Court entered an order dismissing the case with pre(cid:61)udice. As of December 31, 2019, we had accrued (cid:4)13 million of estimated losses for this action. As a result of the settlement, we accrued an incremental (cid:4)(cid:21) million litigation loss during 2020. See Note 13. (cid:87)Commitments and Contingencies(cid:88) to our consolidated financial statements for additional information on these matters. For(cid:39)(cid:43)(cid:41)(cid:48) (cid:37)urr(cid:39)(cid:48)(cid:37)y (cid:3)(cid:46)o(cid:53)(cid:53)(cid:4) (cid:43)(cid:48)(cid:37)om(cid:39)(cid:5) (cid:48)(cid:39)(cid:54) Foreign currency (loss) income, net consists of the net effect of gains and losses resulting from holding assets and liabilities and conducting transactions denominated in currencies other than our subsidiaries(cid:89) functional currencies. (cid:21)4 The following table shows foreign currency (loss) income, net for the years ended December 31, 2020, 2019, and 201(cid:23): (cid:4)D(cid:62)llar(cid:66) in t(cid:55)(cid:62)u(cid:66)an(cid:51)(cid:66)(cid:5) (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:19) (cid:13)(cid:11)(cid:13)(cid:11) (cid:62)(cid:69)er (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:20) (cid:62)(cid:69)er (cid:13)(cid:11)(cid:12)(cid:19) Foreign currency (loss) income, net . . . . . . . . . . . . . . . . . . . . (cid:4) (4,(cid:23)90) (cid:4) 2,291 (cid:4) (5(cid:22)0) (cid:4) ((cid:22),1(cid:23)1) 313 (cid:5) (cid:4) 2,(cid:23)(cid:21)1 502 (cid:5) (cid:47)ear(cid:66) En(cid:51)e(cid:51) C(cid:55)ange Foreign currency loss increased in 2020 compared to 2019 primarily due to higher costs associated with hedging activities related to our subsidiaries in Japan and Europe and differences between our economic hedge positions and the underlying exposures. (cid:20)(cid:48)(cid:54)(cid:39)r(cid:39)(cid:53)(cid:54) (cid:43)(cid:48)(cid:37)om(cid:39) Interest income is earned on our cash, cash equivalents, marketable securities, restricted cash, and restricted marketable securities. Interest income also includes interest earned from notes receivable and late customer payments. The following table shows interest income for the years ended December 31, 2020, 2019, and 201(cid:23): (cid:4)D(cid:62)llar(cid:66) in t(cid:55)(cid:62)u(cid:66)an(cid:51)(cid:66)(cid:5) (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:19) (cid:13)(cid:11)(cid:13)(cid:11) (cid:62)(cid:69)er (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:20) (cid:62)(cid:69)er (cid:13)(cid:11)(cid:12)(cid:19) Interest income . . . . . . . . . . . . . (cid:4) 1(cid:21),559 (cid:4) 4(cid:23),(cid:23)(cid:23)(cid:21) (cid:4) 59,(cid:22)(cid:23)(cid:23) (cid:4) (32,32(cid:22)) ((cid:21)(cid:21)) (cid:5) (cid:4) (10,902) (1(cid:23)) (cid:5) (cid:47)ear(cid:66) En(cid:51)e(cid:51) C(cid:55)ange Interest income during 2020 decreased compared to 2019 primarily due to lower interest rates on cash and cash equivalents and lower average balances and interest rates associated with time deposits and marketable securities. (cid:20)(cid:48)(cid:54)(cid:39)r(cid:39)(cid:53)(cid:54) (cid:39)(cid:58)(cid:50)(cid:39)(cid:48)(cid:53)(cid:39)(cid:5) (cid:48)(cid:39)(cid:54) Interest expense, net is primarily comprised of interest incurred on long(cid:12)term debt, settlements of interest rate swap contracts, and changes in the fair value of interest rate swap contracts that do not qualify for hedge accounting in accordance with Accounting Standards Codification ((cid:87)ASC(cid:88)) (cid:23)15. We may capitalize interest expense to our pro(cid:61)ect assets or property, plant and equipment when such costs qualify for interest capitalization, which reduces the amount of net interest expense reported in any given period. The following table shows interest expense, net for the years ended December 31, 2020, 2019, and 201(cid:23): (cid:4)D(cid:62)llar(cid:66) in t(cid:55)(cid:62)u(cid:66)an(cid:51)(cid:66)(cid:5) (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:19) (cid:13)(cid:11)(cid:13)(cid:11) (cid:62)(cid:69)er (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:20) (cid:62)(cid:69)er (cid:13)(cid:11)(cid:12)(cid:19) Interest expense, net . . . . . . . . . (cid:4) (24,03(cid:21)) (cid:4) (2(cid:22),0(cid:21)(cid:21)) (cid:4) (25,921) (cid:4) 3,030 (11) (cid:5) (cid:4) (1,145) 4 (cid:5) (cid:47)ear(cid:66) En(cid:51)e(cid:51) C(cid:55)ange Interest expense, net in 2020 decreased compared to 2019 primarily due to lower interest expense associated with pro(cid:61)ect debt, partially offset by higher amortization of debt discounts and issuance costs and a decrease in capitalized interest. (cid:26)(cid:54)(cid:42)(cid:39)r (cid:3)(cid:39)(cid:58)(cid:50)(cid:39)(cid:48)(cid:53)(cid:39)(cid:4) (cid:43)(cid:48)(cid:37)om(cid:39)(cid:5) (cid:48)(cid:39)(cid:54) Other (expense) income, net is primarily comprised of miscellaneous items and realized gains and losses on the sale of marketable securities and restricted marketable securities. (cid:21)5 The following table shows other (expense) income, net for the years ended December 31, 2020, 2019, and 201(cid:23): (cid:4)D(cid:62)llar(cid:66) in t(cid:55)(cid:62)u(cid:66)an(cid:51)(cid:66)(cid:5) (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:19) (cid:13)(cid:11)(cid:13)(cid:11) (cid:62)(cid:69)er (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:20) (cid:62)(cid:69)er (cid:13)(cid:11)(cid:12)(cid:19) Other (expense) income, net . . . (cid:4) (11,932) (cid:4) 1(cid:22),545 (cid:4) 39,(cid:22)3(cid:22) (cid:4) (29,4(cid:22)(cid:22)) (1(cid:21)(cid:23)) (cid:5) (cid:4) (22,192) (5(cid:21)) (cid:5) (cid:47)ear(cid:66) En(cid:51)e(cid:51) C(cid:55)ange Other expense, net increased in 2020 compared to 2019 primarily due to lower realized gains from sales of restricted marketable securities and expected credit losses associated with certain notes receivable, partially offset by prior period charges associated with certain letter of credit arrangements and the impairment of a strategic investment. See Note (cid:22). (cid:87)Consolidated Balance Sheet Details(cid:88) to our consolidated financial statements for further information about the allowance for credit losses for our notes receivable. (cid:20)(cid:48)(cid:37)om(cid:39) (cid:54)a(cid:58) (cid:36)(cid:39)(cid:48)(cid:39)(cid:40)(cid:43)(cid:54) (cid:3)(cid:39)(cid:58)(cid:50)(cid:39)(cid:48)(cid:53)(cid:39)(cid:4) Income tax expense or benefit, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect our best estimate of current and future taxes to be paid. We are sub(cid:61)ect to income taxes in both the United States and numerous foreign (cid:61)urisdictions in which we operate, principally Japan, Malaysia, and (cid:48)ietnam. Significant (cid:61)udgments and estimates are required to determine our consolidated income tax expense. The statutory federal corporate income tax rate in the United States is 21(cid:5), and the tax rates in Japan, Malaysia, and (cid:48)ietnam are 30.(cid:21)(cid:5), 24(cid:5), and 20(cid:5), respectively. In Malaysia, we have been granted a long(cid:12)term tax holiday, scheduled to expire in 202(cid:22), pursuant to which substantially all of our income earned in Malaysia is exempt from income tax, conditional upon our continued compliance with certain employment and investment thresholds. In (cid:48)ietnam, we have been granted a tax incentive, scheduled to expire at the end of 2025, pursuant to which income earned in (cid:48)ietnam is sub(cid:61)ect to reduced tax rates. The following table shows income tax benefit (expense) for the years ended December 31, 2020, 2019, and 201(cid:23): (cid:4)D(cid:62)llar(cid:66) in t(cid:55)(cid:62)u(cid:66)an(cid:51)(cid:66)(cid:5) (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:19) (cid:13)(cid:11)(cid:13)(cid:11) (cid:62)(cid:69)er (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:20) (cid:62)(cid:69)er (cid:13)(cid:11)(cid:12)(cid:19) Income tax benefit (expense) . . (cid:4) 10(cid:22),294 (cid:4) 5,4(cid:23)0 (cid:4) (3,441) (cid:4) 101,(cid:23)14 1,(cid:23)5(cid:23) (cid:5) (cid:4) (cid:23),921 (259) (cid:5) Effective tax rate . . . . . . . . . . . . (3(cid:21).(cid:21)) (cid:5) 4.(cid:21) (cid:5) 3.0 (cid:5) (cid:47)ear(cid:66) En(cid:51)e(cid:51) C(cid:55)ange Our tax rate is affected by recurring items, such as tax rates in foreign (cid:61)urisdictions and the relative amounts of income we earn in those (cid:61)urisdictions. The rate is also affected by discrete items that may occur in any given period, but are not consistent from period to period. Income tax benefit increased by (cid:4)101.(cid:23) million during 2020 compared to 2019 primarily due to a tax benefit from the effect of tax law changes associated with the CARES Act, the reversal of uncertain tax positions due to the expiration of the statute of limitations, and the release of the valuation allowance associated with our (cid:48)ietnamese subsidiary due to its current year operating income, partially offset by higher pretax income. (cid:17)(cid:51)u(cid:43)(cid:54)y (cid:43)(cid:48) (cid:39)ar(cid:48)(cid:43)(cid:48)(cid:41)(cid:53)(cid:5) (cid:48)(cid:39)(cid:54) o(cid:40) (cid:54)a(cid:58) Equity in earnings, net of tax represents our proportionate share of the earnings or losses from equity method investments as well as any gains or losses on the sale or disposal of such investments. The following table shows equity in earnings, net of tax for the years ended December 31, 2020, 2019, and 201(cid:23): (cid:4)D(cid:62)llar(cid:66) in t(cid:55)(cid:62)u(cid:66)an(cid:51)(cid:66)(cid:5) (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:19) (cid:13)(cid:11)(cid:13)(cid:11) (cid:62)(cid:69)er (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:20) (cid:62)(cid:69)er (cid:13)(cid:11)(cid:12)(cid:19) Equity in earnings, net of tax . . . (cid:4) (2,129) (cid:4) (2(cid:23)4) (cid:4) 34,(cid:21)20 (cid:4) (1,(cid:23)45) (cid:21)50 (cid:5) (cid:4) (34,904) (101) (cid:5) (cid:47)ear(cid:66) En(cid:51)e(cid:51) C(cid:55)ange Equity in earnings, net of tax in 2020 was consistent with equity in earnings, net of tax in 2019. (cid:21)(cid:21) Li(cid:64)ui(cid:51)it(cid:72) an(cid:51) Ca(cid:63)ital Re(cid:66)(cid:62)ur(cid:50)e(cid:66) As of December 31, 2020, we believe that our cash, cash equivalents, marketable securities, cash flows from operating activities, contracts with customers for the future sale of solar modules, and advanced(cid:12)stage pro(cid:61)ect pipeline will be sufficient to meet our working capital, capital expenditure, and systems pro(cid:61)ect investment needs for at least the next 12 months. As needed, we also believe we will have adequate access to the capital markets. In addition, we have availability under our Revolving Credit Facility, under which we have made no borrowings as of December 31, 2020. We monitor our working capital to ensure we have adequate liquidity, both domestically and internationally. We intend to maintain appropriate debt levels based upon cash flow expectations, our overall cost of capital, and expected cash requirements for operations, such as systems pro(cid:61)ect development activities in certain international regions. However, our ability to raise capital on terms commercially acceptable to us could be constrained if there is insufficient lender or investor interest due to company(cid:12)specific, industry(cid:12)wide, or broader market concerns, such as a tightening of the supply of capital due to the CO(cid:48)ID(cid:12)19 pandemic and related containment measures. Any incremental debt financings could result in increased debt service expenses and/or restrictive covenants, which could limit our ability to pursue our strategic plans. As of December 31, 2020, we had (cid:4)1.(cid:22) billion in cash, cash equivalents, and marketable securities compared to (cid:4)2.2 billion as of December 31, 2019. The decrease in cash, cash equivalents, and marketable securities was primarily driven by purchases of property, plant and equipment(cid:26) the (cid:4)350 million settlement payment associated with our prior class action lawsuit(cid:26) the timing of cash receipts from certain third(cid:12)party module sales, for which proceeds were received in late 2019 prior to the step down in the U.S. investment tax credit from 30(cid:5) to 2(cid:21)(cid:5)(cid:26) and other operating expenditures(cid:26) partially offset by cash proceeds from the sale and construction of certain systems pro(cid:61)ects. As of December 31, 2020 and 2019, (cid:4)1.1 billion and (cid:4)0.9 billion, respectively, of our cash, cash equivalents, and marketable securities was held by our foreign subsidiaries and was primarily based in U.S. dollar, Japanese yen, and Indian rupee denominated holdings. We utilize a variety of tax planning and financing strategies in an effort to ensure that our worldwide cash is available in the locations in which it is needed. If certain international funds were needed for our operations in the United States, we may be required to accrue and pay certain U.S. and foreign taxes to repatriate such funds. We maintain the intent and ability to permanently reinvest our accumulated earnings outside the United States, with the exception of our subsidiaries in Canada and Germany. In addition, changes to foreign government banking regulations may restrict our ability to move funds among various (cid:61)urisdictions under certain circumstances, which could negatively impact our access to capital, resulting in an adverse effect on our liquidity and capital resources. We continually evaluate forecasted global demand and seek to balance our manufacturing capacity with such demand. We continue to increase the nameplate production capacity of our existing manufacturing facilities by improving our production throughput, increasing module wattage (or conversion efficiency), and improving manufacturing yield losses. During 2021, we expect to spend (cid:4)425 million to (cid:4)4(cid:22)5 million for capital expenditures, including upgrades to machinery and equipment that we believe will further increase our module wattage and expand capacity and throughput at our manufacturing facilities. We also expect to commit significant working capital to purchase various raw materials used in our module manufacturing process. Our failure to obtain raw materials and components that meet our quality, quantity, and cost requirements in a timely manner could interrupt or impair our ability to manufacture our solar modules or increase our manufacturing costs. Accordingly, we may enter into long(cid:12)term supply agreements to mitigate potential risks related to the procurement of key raw materials and components, and such agreements may be noncancelable or cancelable with a significant penalty. For example, we have entered into long(cid:12)term supply agreements for the purchase of certain specified minimum volumes of substrate glass and cover glass for our P(cid:48) solar modules. Our remaining purchases under these supply agreements are expected to be approximately (cid:4)1.(cid:23) billion of substrate glass and (cid:4)410 million of cover glass. We have the right to terminate these agreements upon payment of specified (cid:21)(cid:22) termination penalties (which, in aggregate, are up to (cid:4)390 million as of December 31, 2020 and decline over the remaining supply periods). Our systems business is expected to continue to have significant liquidity requirements in the future. From time to time, we enter into commercial commitments in the form of letters of credit, bank guarantees, and surety bonds to provide financial and performance assurance to third parties, the ma(cid:61)ority of which support our systems pro(cid:61)ects. Our Revolving Credit Facility provides us with a sub(cid:12)limit of (cid:4)400.0 million to issue letters of credit, sub(cid:61)ect to certain additional limits depending on the currencies of such letters of credit. The net amount of our pro(cid:61)ect assets and related portions of deferred revenue and long(cid:12)term debt, which approximates our net capital investment in the development and construction of systems pro(cid:61)ects, was (cid:4)2(cid:21)0.(cid:21) million as of December 31, 2020. Solar power pro(cid:61)ect development cycles, which span the time between the identification of a site location and the commercial operation of a system, vary substantially and can take many years to mature. As a result of these long pro(cid:61)ect cycles and strategic decisions to finance the development of certain pro(cid:61)ects using our working capital, we may need to make significant up(cid:12)front investments of resources in advance of the receipt of any cash from the sale of such pro(cid:61)ects. Delays in construction or in completing the sale of our systems pro(cid:61)ects that we are self(cid:12)financing may also impact our liquidity. In certain circumstances, we may need to finance construction costs exclusively using working capital, if pro(cid:61)ect financing becomes unavailable due to market(cid:12)wide, regional, or other concerns. From time to time, we may develop pro(cid:61)ects in certain markets around the world where we may hold all or a significant portion of the equity in a pro(cid:61)ect for several years. Given the duration of these investments and the currency risk relative to the U.S. dollar in some of these markets, we continue to explore local financing alternatives. Should these financing alternatives be unavailable or too cost prohibitive, we could be exposed to significant currency risk and our liquidity could be adversely impacted. Additionally, we may elect to retain an ownership interest in certain systems pro(cid:61)ects after they become operational if we determine it would be of economic and strategic benefit to do so. If, for example, we cannot sell a system at economics that are attractive to us or potential customers are unwilling to assume the risks and rewards typical of system ownership, we may instead elect to temporarily own and operate such system until we can sell it on economically attractive terms. The decision to retain ownership of a system impacts our liquidity depending upon the size and cost of the pro(cid:61)ect. As of December 31, 2020, we had (cid:4)243.4 million of net P(cid:48) solar power systems that had been placed in service, primarily in international markets. We have elected, and may in the future elect, to enter into temporary or long(cid:12)term pro(cid:61)ect financing to reduce the impact on our liquidity and working capital with regard to such systems. From time to time, we may be party to legal matters and claims against us. In January 2020, we entered into an MOU to settle a class action lawsuit filed in the Arizona District Court. Pursuant to the MOU, among other things, we agreed to pay a total of (cid:4)350 million to settle the claims in the lawsuit in exchange for mutual releases and dismissal with pre(cid:61)udice of the complaint upon court approval of the settlement. In February 2020, we subsequently entered into a Stipulation and Agreement of Settlement (the (cid:87)Settlement Agreement(cid:88)) with certain named plaintiffs on terms and conditions that were consistent with the MOU. Pursuant to the Settlement Agreement, among other things, (i) we contributed (cid:4)350 million in cash to a settlement fund that will be used to pay all settlement fees and expenses, attorneys(cid:89) fees and expenses, and cash payments to members of the settlement class and (ii) the settlement class has agreed to release us, the other defendants named in the class action, and certain of their respective related parties from any and all claims concerning, based on, arising out of, or in connection with the class action. The Settlement Agreement contained no admission of liability, wrongdoing, or responsibility by any of the parties. On June 30, 2020, the Arizona District Court entered an order granting final approval of the settlement and dismissed the Class Action with pre(cid:61)udice. (cid:21)(cid:23) (cid:15)a(cid:53)(cid:42) F(cid:46)o(cid:57)(cid:53) The following table summarizes key cash flow activity for the years ended December 31, 2020, 2019, and 201(cid:23) (in thousands): Net cash provided by (used in) operating activities . . . . . . . . . . . . . . . . . . . . . . Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash (used in) provided by financing activities . . . . . . . . . . . . . . . . . . . . . . Effect of exchange rate changes on cash, cash equivalents and restricted cash . Net decrease in cash, cash equivalents and restricted cash . . . . . . . . . . . . . . . . (cid:13)(cid:11)(cid:13)(cid:11) (cid:4) 3(cid:22),120 (cid:4) (131,22(cid:22)) ((cid:23)2,5(cid:23)(cid:22)) 3,(cid:22)(cid:22)(cid:23) (1(cid:22)2,91(cid:21)) (cid:4) (cid:4) (cid:13)(cid:11)(cid:12)(cid:20) 1(cid:22)4,201 (cid:4) (3(cid:21)2,29(cid:23)) (cid:22)4,943 (2,959) (11(cid:21),113) (cid:4) (cid:13)(cid:11)(cid:12)(cid:19) (32(cid:21),(cid:23)09) ((cid:21)(cid:23)2,(cid:22)14) 255,22(cid:23) (13,55(cid:23)) ((cid:22)(cid:21)(cid:22),(cid:23)53) (cid:28)perating (cid:15)cti(cid:57)ities The decrease in net cash provided by operating activities during 2020 was primarily driven by the (cid:4)350 million settlement payment associated with our prior class action lawsuit as described above and the timing of cash receipts from certain third(cid:12)party module sales, for which proceeds were received in late 2019 prior to the step down in the U.S. investment tax credit, partially offset by higher cash proceeds from the sale of systems pro(cid:61)ects in Japan and the United States. (cid:23)n(cid:57)esting (cid:15)cti(cid:57)ities The decrease in net cash used in investing activities during 2020 was primarily due to lower purchases of property, plant and equipment. (cid:20)inancing (cid:15)cti(cid:57)ities The increase in net cash used in financing activities during 2020 was primarily due to the repayment of the Ishikawa Credit Agreement, partially offset by proceeds from borrowings under pro(cid:61)ect specific debt financings associated with the construction of certain pro(cid:61)ects in Japan. (cid:15)o(cid:48)(cid:54)ra(cid:37)(cid:54)ua(cid:46) (cid:26)(cid:36)(cid:46)(cid:43)(cid:41)a(cid:54)(cid:43)o(cid:48)(cid:53) The following table presents the payments due by fiscal year for our outstanding contractual obligations as of December 31, 2020 (in thousands), excluding certain obligations we expect to transfer to Clairvest upon the closing of the sale of our North American O(cid:6)M business and to OMERS upon the closing of the sale of our U.S. pro(cid:61)ect development business: Long(cid:12)term debt obligations . . . . . . . . . . . . . . Interest payments (1) . . . . . . . . . . . . . . . . . . . Operating lease obligations . . . . . . . . . . . . . . Purchase obligations (2) . . . . . . . . . . . . . . . . Recycling obligations . . . . . . . . . . . . . . . . . . Contingent consideration (3) . . . . . . . . . . . . . Other obligations (4) . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86) (cid:4) T(cid:62)tal 2(cid:23)(cid:22),149 (cid:4) 11(cid:21),030 252,(cid:22)(cid:22)1 1,05(cid:23),(cid:21)(cid:21)4 130,(cid:21)(cid:23)(cid:23) 2,243 3,541 (cid:4) 1,(cid:23)51,0(cid:23)(cid:21) (cid:4) (cid:38)a(cid:72)(cid:60)ent(cid:66) Due (cid:49)(cid:72) (cid:47)ear Le(cid:66)(cid:66) T(cid:55)an (cid:12) (cid:47)ear (cid:12) (cid:8) (cid:14) (cid:47)ear(cid:66) (cid:14) (cid:8) (cid:16) (cid:47)ear(cid:66) (cid:35)(cid:62)re T(cid:55)an (cid:16) (cid:47)ear(cid:66) 41,(cid:23)01 (cid:4) 11,433 1(cid:22),(cid:23)5(cid:23) 590,51(cid:21) (cid:86) 2,243 2,122 (cid:21)(cid:21)5,9(cid:22)3 (cid:4) 23,932 (cid:4) 21,(cid:23)(cid:23)1 34,(cid:23)(cid:21)1 19(cid:23),993 (cid:86) (cid:86) 1,119 2(cid:23)0,(cid:22)(cid:23)(cid:21) (cid:4) (cid:21)2,2(cid:23)(cid:22) (cid:4) 19,(cid:23)1(cid:23) 33,(cid:23)(cid:23)4 1(cid:21)1,(cid:22)30 (cid:86) (cid:86) 300 2(cid:22)(cid:23),019 (cid:4) 159,129 (cid:21)2,(cid:23)9(cid:23) 1(cid:21)(cid:21),1(cid:21)(cid:23) 10(cid:22),425 130,(cid:21)(cid:23)(cid:23) (cid:86) (cid:86) (cid:21)2(cid:21),30(cid:23) (1) Includes estimated cash interest to be paid over the remaining terms of the underlying debt. Interest payments are based on fixed and floating rates as of December 31, 2020. (cid:21)9 (2) Purchase obligations represent agreements to purchase goods or services, including open purchase orders and contracts with fixed volume commitments, that are noncancelable or cancelable with a significant penalty. Purchase obligations for our long(cid:12)term supply agreements for the purchase of substrate glass and cover glass represent specified termination penalties, which are up to (cid:4)390 million in the aggregate under the agreements. Our remaining purchases under these supply agreements are expected to be approximately (cid:4)1.(cid:23) billion of substrate glass and (cid:4)410 million of cover glass. (3) In connection with business or pro(cid:61)ect acquisitions, we may agree to pay additional amounts to the selling parties upon achievement of certain milestones. See Note 13. (cid:87)Commitments and Contingencies(cid:88) to our consolidated financial statements for further information. (4) Includes expected letter of credit fees and unused revolver fees. We have excluded (cid:4)5.4 million of unrecognized tax benefits from the amounts presented above as the timing of such obligations is uncertain. O(cid:53)(cid:53)(cid:8)(cid:24)alan(cid:50)e S(cid:55)eet Arrange(cid:60)ent(cid:66) As of December 31, 2020, we had no off(cid:12)balance sheet debt or similar obligations, other than financial assurance related instruments and operating leases, which are not classified as debt. We do not guarantee any third(cid:12)party debt. See Note 13. (cid:87)Commitments and Contingencies(cid:88) to our consolidated financial statements for further information about our financial assurance related instruments. Re(cid:50)ent A(cid:50)(cid:50)(cid:62)unting (cid:38)r(cid:62)n(cid:62)un(cid:50)e(cid:60)ent(cid:66) See Note 3. (cid:87)Recent Accounting Pronouncements(cid:88) to our consolidated financial statements for a summary of recent accounting pronouncements. Criti(cid:50)al A(cid:50)(cid:50)(cid:62)unting E(cid:66)ti(cid:60)ate(cid:66) In preparing our consolidated financial statements in conformity with generally accepted accounting principles in the United States ((cid:87)U.S. GAAP(cid:88)), we make estimates and assumptions that affect the amounts of reported assets, liabilities, revenues, and expenses, as well as the disclosure of contingent liabilities. Some of our accounting policies require the application of significant (cid:61)udgment in the selection of the appropriate assumptions for making these estimates. By their nature, these (cid:61)udgments are sub(cid:61)ect to an inherent degree of uncertainty. We base our (cid:61)udgments and estimates on our historical experience, our forecasts, and other available information as appropriate. The actual results experienced by us may differ materially and adversely from our estimates. To the extent there are material differences between our estimates and the actual results, our future results of operations will be affected. Our significant accounting policies are described in Note 2. (cid:87)Summary of Significant Accounting Policies(cid:88) to our consolidated financial statements. The accounting policies that require the most significant (cid:61)udgment and estimates include the following: Re(cid:57)enue Recognition (cid:63) (cid:31)o(cid:47)ar Po(cid:58)er (cid:31)(cid:60)stem (cid:31)a(cid:47)es and(cid:8)or (cid:19)PC (cid:31)er(cid:57)ices. We recognize revenue for the sale of a development pro(cid:61)ect, which excludes EPC services, or for the sale of a completed system when we enter into the associated sales contract with the customer. For EPC services, or sales of solar power systems with EPC services, we generally recognize revenue over time as our performance creates or enhances an energy generation asset controlled by the customer. Furthermore, the sale of a solar power system combined with EPC services represents a single performance obligation for the development and construction of a single generation asset. For such arrangements, we recognize revenue and gross profit as work is performed using cost based input methods, for which we determine our progress toward contract completion based on the relationship between actual costs incurred and total estimated costs (including solar module costs) of the contract. Such revenue recognition is also dependent, in part, on our customers(cid:89) commitment to perform their obligations under the contract, which is typically measured through the receipt of cash deposits or other forms of financial security issued by creditworthy financial institutions or parent entities. (cid:22)0 Cost based input methods of revenue recognition are considered a faithful depiction of our efforts to satisfy long(cid:12) term construction contracts and therefore reflect the transfer of goods to a customer under such contracts. Costs incurred that do not contribute to satisfying our performance obligations ((cid:87)inefficient costs(cid:88)) are excluded from our input methods of revenue recognition as the amounts are not reflective of our transferring control of the system to the customer. Costs incurred toward contract completion may include costs associated with solar modules, direct materials, labor, subcontractors, and other indirect costs related to contract performance. We recognize solar module and direct material costs as incurred when such items have been installed in a system. Cost based input methods of revenue recognition require us to make estimates of net contract revenues and costs to complete our pro(cid:61)ects. In making such estimates, significant (cid:61)udgment is required to evaluate assumptions related to the amount of net contract revenues, including the impact of any performance incentives, liquidated damages, and other payments to customers. Significant (cid:61)udgment is also required to evaluate assumptions related to the costs to complete our pro(cid:61)ects, including materials, labor, contingencies, and other system costs. If the estimated total costs on any contract, including any inefficient costs, are greater than the net contract revenues, we recognize the entire estimated loss in the period the loss becomes known. The cumulative effect of revisions to estimates related to net contract revenues or costs to complete contracts are recorded in the period in which the revisions to estimates are identified and the amounts can be reasonably estimated. The effect of the changes on future periods are recognized as if the revised estimates had been used since revenue was initially recognized under the contract. Such revisions could occur in any reporting period, and the effects may be material depending on the size of the contracts or the changes in estimates. As part of our solar power system sales, we conduct performance testing of a system prior to substantial completion to confirm the system meets its operational and capacity expectations noted in the EPC agreement. In addition, we may provide an energy performance test during the first or second year of a system(cid:89)s operation to demonstrate that the actual energy generation for the applicable period meets or exceeds the modeled energy expectation, after certain ad(cid:61)ustments. These tests are based on meteorological, energy, and equipment performance data measured at the system(cid:89)s location as well as certain pro(cid:61)ections of such data over the remaining measurement period. In certain instances, a bonus payment may be received at the end of the applicable test period if the system performs above a specified level. Conversely, if there is an underperformance event with regards to these tests, we may incur liquidated damages as a percentage of the EPC contract price. Such performance guarantees represent a form of variable consideration and are estimated at contract inception at their most likely amount and updated at the end of each reporting period as additional performance data becomes available and only to the extent that it is probable that a significant reversal of any incremental revenue will not occur. Re(cid:57)enue Recognition (cid:63) (cid:28)perations and (cid:26)aintenance. We recognize revenue for standard, recurring O(cid:6)M services over time as customers receive and consume the benefits of such services. Costs of O(cid:6)M services are expensed in the period in which they are incurred. As part of our O(cid:6)M service offerings, we typically offer an effective availability guarantee, which stipulates that a system will be available to generate a certain percentage of total possible energy during a specific period after ad(cid:61)usting for factors outside our control as the service provider. These tests are based on meteorological, energy, and equipment performance data measured at the system(cid:89)s location as well as certain pro(cid:61)ections of such data over the remaining measurement period. If system availability exceeds a contractual threshold, we may receive a bonus payment, or if system availability falls below a separate threshold, we may incur liquidated damages for certain lost energy under the PPA. Such bonuses or liquidated damages represent a form of variable consideration and are estimated and recognized over time as customers receive and consume the benefits of the O(cid:6)M services. (cid:15)ccrued (cid:31)o(cid:47)ar (cid:26)odu(cid:47)e Co(cid:47)(cid:47)ection and Rec(cid:60)c(cid:47)ing (cid:25)ia(cid:37)i(cid:47)it(cid:60). We previously established a module collection and recycling program, which has since been discontinued, to collect and recycle modules sold and covered under such program once the modules reach the end of their service lives. For legacy customer sales contracts that were covered under this program, we recognized expense at the time of sale for the estimated cost of our obligations to collect and recycle such modules. We estimate the cost of our collection and recycling obligations based on the present value of the expected future cost of collecting and recycling the solar modules, which includes estimates for the cost of (cid:22)1 packaging materials(cid:26) the cost of freight from the solar module installation sites to a recycling center(cid:26) material, labor, and capital costs(cid:26) and by(cid:12)product credits for certain materials recovered during the recycling process. We base these estimates on our experience collecting and recycling solar modules and certain assumptions regarding costs at the time the solar modules will be collected and recycled. In the periods between the time of sale and the related settlement of the collection and recycling obligation, we accrete the carrying amount of the associated liability and classify the corresponding expense within (cid:87)Selling, general and administrative(cid:88) expense on our consolidated statements of operations. We periodically review our estimates of expected future recycling costs and may ad(cid:61)ust our liability accordingly. Product (cid:35)arranties. We provide a limited P(cid:48) solar module warranty covering defects in materials and workmanship under normal use and service conditions for up to 12 years. We also typically warrant that modules installed in accordance with agreed(cid:12)upon specifications will produce at least 9(cid:23)(cid:5) of their labeled power output rating during the first year, with the warranty coverage reducing by a degradation factor every year thereafter throughout the limited power output warranty period of up to 30 years. Among other things, our solar module warranty also covers the resulting power output loss from cell cracking. As an alternative form of our standard limited module power output warranty, we have also offered an aggregated or system(cid:12)level limited module performance warranty. This system(cid:12)level limited module performance warranty is designed for utility(cid:12)scale systems and provides 25(cid:12)year system(cid:12)level energy degradation protection. This warranty represents a practical expedient to address the challenge of identifying, from the potential millions of modules installed in a utility(cid:12)scale system, individual modules that may be performing below warranty thresholds by focusing on the aggregate energy generated by the system rather than the power output of individual modules. The system(cid:12) level limited module performance warranty is typically calculated as a percentage of a system(cid:89)s expected energy production, ad(cid:61)usted for certain actual site conditions, with the warranted level of performance declining each year in a linear fashion, but never falling below (cid:23)0(cid:5) during the term of the warranty. In addition to our limited solar module warranties described above, for P(cid:48) solar power systems we construct, we typically provide limited warranties for defects in engineering design, installation, and BoS part workmanship for a period of one to two years following the substantial completion of a system or a block within the system. When we recognize revenue for module or system sales, we accrue liabilities for the estimated future costs of meeting our limited warranty obligations. We make and revise these estimates based primarily on the number of our solar modules under warranty installed at customer locations, our historical experience with and pro(cid:61)ections of warranty claims, and our estimated per(cid:12)module replacement costs. We also monitor our expected future module performance through certain quality and reliability testing and actual performance in certain field installation sites. In general, we expect the return rates for our newer series of module technology to be lower than our older series. We estimate that the return rate for such newer series of module technology will be less than 1(cid:5). (cid:23)ncome (cid:32)a(cid:59)es. We are sub(cid:61)ect to the income tax laws of the United States, its states and municipalities, and those of the foreign (cid:61)urisdictions in which we have significant business operations. Such tax laws are complex and sub(cid:61)ect to different interpretations by the taxpayer and the relevant taxing authorities. We make (cid:61)udgments and interpretations regarding the application of these inherently complex tax laws when determining our provision for income taxes and also make estimates about when in the future certain items are expected to affect taxable income in the various tax (cid:61)urisdictions. Disputes over interpretations of tax laws may be settled with the relevant taxing authority upon examination or audit. We regularly evaluate the likelihood of assessments in each of our taxing (cid:61)urisdictions resulting from current and future examinations, and we record tax liabilities as appropriate. In preparing our consolidated financial statements, we calculate our income tax provision based on our interpretation of the tax laws and regulations in the various (cid:61)urisdictions where we conduct business. This requires us to estimate our current tax obligations, assess uncertain tax positions, and assess temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities. These temporary differences result in deferred tax assets and liabilities. We must also assess the likelihood that each of our deferred tax assets will be realized. To (cid:22)2 the extent we believe that realization of any of our deferred tax assets is not more likely than not, we establish a valuation allowance. When we establish a valuation allowance or increase this allowance in a reporting period, we generally record a corresponding tax expense. Conversely, to the extent circumstances indicate that a valuation allowance is no longer necessary, that portion of the valuation allowance is reversed, which generally reduces our overall income tax expense. We establish liabilities for potential additional taxes based on our assessment of the outcome of our tax positions. Once established, we ad(cid:61)ust these liabilities when additional information becomes available or when an event occurs requiring an ad(cid:61)ustment. Significant (cid:61)udgment is required in making these estimates and the actual cost of a tax assessment, fine, or penalty may ultimately be materially different from our recorded liabilities, if any. We continually explore initiatives to better align our tax and legal entity structure with the footprint of our global operations and recognize the tax impact of these initiatives, including changes in the assessment of uncertain tax positions, indefinite reinvestment exception assertions, and the realizability of deferred tax assets, in the period when we believe all necessary internal and external approvals associated with such initiatives have been obtained, or when the initiatives are materially complete. (cid:15)sset (cid:23)mpairments. We assess long(cid:12)lived assets classified as (cid:87)held and used,(cid:88) including our property, plant and equipment(cid:26) P(cid:48) solar power systems(cid:26) pro(cid:61)ect assets(cid:26) operating lease assets(cid:26) and intangible assets for impairment whenever events or changes in circumstances arise, including consideration of technological obsolescence, that may indicate that the carrying amount of such assets may not be recoverable, and these assessments require significant (cid:61)udgment in determining whether such events or changes have occurred. These events or changes in circumstances may include a significant decrease in the market price of a long(cid:12)lived asset(cid:26) a significant adverse change in the extent or manner in which a long(cid:12)lived asset is being used or in its physical condition(cid:26) a significant adverse change in the business climate that could affect the value of a long(cid:12)lived asset(cid:26) an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long(cid:12)lived asset(cid:26) a current(cid:12)period operating or cash flow loss combined with a history of such losses or a pro(cid:61)ection of future losses associated with the use of a long(cid:12)lived asset(cid:26) or a current expectation that, more likely than not, a long(cid:12)lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. For purposes of recognition and measurement of an impairment loss, long(cid:12)lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities, and we must also exercise (cid:61)udgment in assessing such groupings and levels. When impairment indicators are present, we compare undiscounted future cash flows, including the eventual disposition of the asset group at market value, to the asset group(cid:89)s carrying value to determine if the asset group is recoverable. If the carrying value of the asset group exceeds the undiscounted future cash flows, we measure any impairment by comparing the fair value of the asset group to its carrying value. Fair value is generally determined by considering (i) internally developed discounted cash flows for the asset group, (ii) third(cid:12)party valuations, and/or (iii) information available regarding the current market value for such assets. If the fair value of an asset group is determined to be less than its carrying value, an impairment in the amount of the difference is recorded in the period that the impairment indicator occurs. Estimating future cash flows requires significant (cid:61)udgment, and such pro(cid:61)ections may vary from the cash flows eventually realized. Ite(cid:60) (cid:18)A. (cid:28)ua(cid:48)(cid:54)(cid:43)(cid:54)a(cid:54)(cid:43)(cid:56)(cid:39) a(cid:48)(cid:38) (cid:28)ua(cid:46)(cid:43)(cid:54)a(cid:54)(cid:43)(cid:56)(cid:39) (cid:16)(cid:43)(cid:53)(cid:37)(cid:46)o(cid:53)ur(cid:39)(cid:53) a(cid:36)ou(cid:54) (cid:24)ar(cid:45)(cid:39)(cid:54) (cid:29)(cid:43)(cid:53)(cid:45) F(cid:62)reign Curren(cid:50)(cid:72) E(cid:71)(cid:50)(cid:55)ange Ri(cid:66)(cid:58) Cash (cid:20)(cid:47)o(cid:58) (cid:19)(cid:59)posure. We expect certain of our subsidiaries to have future cash flows that will be denominated in currencies other than the subsidiaries(cid:89) functional currencies. Changes in the exchange rates between the functional currencies of our subsidiaries and the other currencies in which they transact will cause fluctuations in the cash flows we expect to receive or pay when these cash flows are realized or settled. Accordingly, we enter into foreign exchange forward contracts to hedge a portion of these forecasted cash flows. These foreign exchange forward (cid:22)3 contracts qualify for accounting as cash flow hedges in accordance with ASC (cid:23)15 and we designated them as such. We initially report unrealized gains or losses for such contracts in (cid:87)Accumulated other comprehensive loss(cid:88) and subsequently reclassify amounts into earnings when the hedged transaction occurs and impacts earnings. For additional details on our derivative hedging instruments and activities, see Note (cid:23). (cid:87)Derivative Financial Instruments(cid:88) to our consolidated financial statements. Certain of our international operations, such as our manufacturing facilities in Malaysia and (cid:48)ietnam, pay a portion of their operating expenses, including associate wages and utilities, in local currencies, which exposes us to foreign currency exchange risk for such expenses. Our manufacturing facilities are also exposed to foreign currency exchange risk for purchases of certain equipment from international vendors. To the extent we expand into new markets, particularly emerging markets, our total foreign currency exchange risk, in terms of both size and exchange rate volatility, and the number of foreign currencies we are exposed to could increase significantly. For the year ended December 31, 2020, 22(cid:5) of our net sales were denominated in foreign currencies, including Japanese yen and Euro. As a result, we have exposure to foreign currencies with respect to our net sales, which has historically represented one of our primary foreign currency exchange risks. A 10(cid:5) change in the U.S. dollar to Japanese yen and Euro exchange rates would have had an aggregate impact on our net sales of (cid:4)53.(cid:23) million, excluding the effect of our hedging activities. (cid:32)ransaction (cid:19)(cid:59)posure. Many of our subsidiaries have assets and liabilities (primarily cash, receivables, deferred taxes, payables, accrued expenses, and solar module collection and recycling liabilities) that are denominated in currencies other than the subsidiaries(cid:89) functional currencies. Changes in the exchange rates between the functional currencies of our subsidiaries and the other currencies in which these assets and liabilities are denominated will create fluctuations in our reported consolidated statements of operations and cash flows. We may enter into foreign exchange forward contracts or other financial instruments to economically hedge assets and liabilities against the effects of currency exchange rate fluctuations. The gains and losses on such foreign exchange forward contracts will economically offset all or part of the transaction gains and losses that we recognize in earnings on the related foreign currency denominated assets and liabilities. For additional details on our economic hedging instruments and activities, see Note (cid:23). (cid:87)Derivative Financial Instruments(cid:88) to our consolidated financial statements. As of December 31, 2020, a 10(cid:5) change in the U.S. dollar relative to our primary foreign currency exposures would not have had a significant impact to our net foreign currency income or loss, including the effect of our hedging activities. Intere(cid:66)t Rate Ri(cid:66)(cid:58) (cid:34)aria(cid:37)(cid:47)e Rate (cid:18)e(cid:37)t (cid:19)(cid:59)posure. We are exposed to interest rate risk as certain of our pro(cid:61)ect specific debt financings have variable interest rates, exposing us to variability in interest expense and cash flows. See Note 12. (cid:87)Debt(cid:88) to our consolidated financial statements for additional information on our long(cid:12)term debt borrowing rates. An increase in relevant interest rates would increase the cost of borrowing under certain of our pro(cid:61)ect specific debt financings. If such variable interest rates changed by 100 basis points, our interest expense for the year ended December 31, 2020 would have changed by (cid:4)1.2 million, including the effect of our hedging activities. Customer (cid:20)inancing (cid:19)(cid:59)posure. We are also indirectly exposed to interest rate risk because many of our customers depend on debt financings to purchase modules or systems. An increase in interest rates could make it challenging for our customers to obtain the capital necessary to make such purchases on favorable terms, or at all. Such factors could reduce demand or lower the price we can charge for our modules and systems, thereby reducing our net sales and gross profit. In addition, we believe that a significant percentage of our customers purchase systems as an investment, funding the initial capital expenditure through a combination of equity and debt. An increase in interest rates could lower an investor(cid:89)s return on investment in a system or make alternative investments more attractive relative to P(cid:48) solar power systems, which, in either case, could cause these end(cid:12)users to seek alternative investments with higher risk(cid:12)ad(cid:61)usted returns. (cid:22)4 (cid:26)arketa(cid:37)(cid:47)e (cid:31)ecurities and Restricted (cid:26)arketa(cid:37)(cid:47)e (cid:31)ecurities (cid:19)(cid:59)posure. We invest in various debt securities, which exposes us to interest rate risk. The primary ob(cid:61)ectives of our investment activities are to preserve principal and provide liquidity, while at the same time maximizing the return on our investments. Many of the securities in which we invest may be sub(cid:61)ect to market risk. Accordingly, a change in prevailing interest rates may cause the market value of such investments to fluctuate. For example, if we hold a security that was issued with an interest rate fixed at the then(cid:12)prevailing rate and the prevailing interest rate subsequently rises, the market value of our investment may decline. For the year ended December 31, 2020, our marketable securities earned a return of 2(cid:5), including the impact of fluctuations in the price of the underlying securities, and had a weighted(cid:12)average maturity of (cid:23) months as of the end of the period. Based on our investment positions as of December 31, 2020, a hypothetical 100 basis point change in interest rates would have resulted in a (cid:4)0.(cid:23) million change in the market value of our investment portfolio. For the year ended December 31, 2020, our restricted marketable securities earned a return of 19(cid:5), including the impact of fluctuations in the price of the underlying securities, and had a weighted(cid:12)average maturity of approximately 15 years as of the end of the period. Based on our restricted marketable securities positions as of December 31, 2020, a hypothetical 100 basis point change in interest rates would have resulted in a (cid:4)40.2 million change in the market value of our restricted marketable securities portfolio. C(cid:62)(cid:60)(cid:60)(cid:62)(cid:51)it(cid:72) an(cid:51) C(cid:62)(cid:60)(cid:63)(cid:62)nent Ri(cid:66)(cid:58) We are exposed to price risks for the raw materials, components, services, and energy costs used in the manufacturing and transportation of our solar modules and BoS parts used in our systems. Additionally, some of our raw materials and components are sourced from a limited number of suppliers or a single supplier. We evaluate our suppliers using a robust qualification process. In some cases, we also enter into long(cid:12)term supply contracts for raw materials and components. Accordingly, we are exposed to price changes in the raw materials and components used in our solar modules and systems. From time to time, we may utilize derivative hedging instruments to mitigate such raw material price changes. In addition, the failure of a key supplier could disrupt our supply chain, which could result in higher prices and/or a disruption in our manufacturing or construction processes. We may be unable to pass along changes in the costs of the raw materials and components for our modules and systems to our customers and may be in default of our delivery obligations if we experience a manufacturing or construction disruption. Cre(cid:51)it Ri(cid:66)(cid:58) We have certain financial and derivative instruments that sub(cid:61)ect us to credit risk. These consist primarily of cash, cash equivalents, marketable securities, accounts receivable, restricted cash and investments, notes receivable, foreign exchange forward contracts, and commodity swap contracts. We are exposed to credit losses in the event of nonperformance by the counterparties to our financial and derivative instruments. We place cash, cash equivalents, marketable securities, restricted cash, restricted marketable securities, foreign exchange forward contracts, and commodity swap contracts with various high(cid:12)quality financial institutions and limit the amount of credit risk from any one counterparty. We continuously evaluate the credit standing of our counterparty financial institutions. We monitor the financial condition of our customers and perform credit evaluations whenever considered necessary. Depending upon the sales arrangement, we may require some form of payment security from our customers, including, but not limited to, advance payments, parent guarantees, standby letters of credit, bank guarantees, surety bonds, or commercial letters of credit. We also have PPAs that sub(cid:61)ect us to credit risk in the event our off(cid:12)take counterparties are unable to fulfill their contractual obligations, which may adversely affect our pro(cid:61)ect assets and certain receivables. Accordingly, we closely monitor the credit standing of existing and potential off(cid:12)take counterparties to limit such risks. (cid:22)5 Ite(cid:60) (cid:19). F(cid:43)(cid:48)a(cid:48)(cid:37)(cid:43)a(cid:46) S(cid:54)a(cid:54)(cid:39)m(cid:39)(cid:48)(cid:54)(cid:53) a(cid:48)(cid:38) Su(cid:50)(cid:50)(cid:46)(cid:39)m(cid:39)(cid:48)(cid:54)ary (cid:16)a(cid:54)a C(cid:62)n(cid:66)(cid:62)li(cid:51)ate(cid:51) Finan(cid:50)ial State(cid:60)ent(cid:66) Our consolidated financial statements as required by this item are included in Item 15. (cid:87)Exhibits and Financial Statement Schedules.(cid:88) See Item 15(a) for a list of our consolidated financial statements. Sele(cid:50)te(cid:51) (cid:39)uarterl(cid:72) Finan(cid:50)ial Data (cid:4)Unau(cid:51)ite(cid:51)(cid:5) The following selected quarterly financial data should be read in con(cid:61)unction with our consolidated financial statements and the related notes thereto and Item (cid:22). (cid:87)Management(cid:89)s Discussion and Analysis of Financial Condition and Results of Operations.(cid:88) This information has been derived from our unaudited consolidated financial statements that, in our opinion, reflect all recurring ad(cid:61)ustments necessary to fairly present the information when read in con(cid:61)unction with our consolidated financial statements. The results of operations for any quarter are not necessarily indicative of the results to be expected for any future period. De(cid:50) (cid:14)(cid:12), (cid:13)(cid:11)(cid:13)(cid:11) Se(cid:63) (cid:14)(cid:11), (cid:13)(cid:11)(cid:13)(cid:11) (cid:32)un (cid:14)(cid:11), (cid:13)(cid:11)(cid:13)(cid:11) (cid:35)ar (cid:14)(cid:12), (cid:13)(cid:11)(cid:13)(cid:11) De(cid:50) (cid:14)(cid:12), (cid:13)(cid:11)(cid:12)(cid:20) Se(cid:63) (cid:14)(cid:11), (cid:13)(cid:11)(cid:12)(cid:20) (cid:32)un (cid:14)(cid:11), (cid:13)(cid:11)(cid:12)(cid:20) (cid:35)ar (cid:14)(cid:12), (cid:13)(cid:11)(cid:12)(cid:20) (cid:4)In t(cid:55)(cid:62)u(cid:66)an(cid:51)(cid:66), e(cid:71)(cid:50)e(cid:63)t (cid:63)er (cid:66)(cid:55)are a(cid:60)(cid:62)unt(cid:66)(cid:5) (cid:39)uarter(cid:66) En(cid:51)e(cid:51) Net sales . . . . . . . . . . . . . . . . (cid:4) (cid:21)09,232 (cid:4) 92(cid:22),5(cid:21)5 (cid:4) (cid:21)42,411 (cid:4) 532,124 (cid:4) 1,399,3(cid:22)(cid:22) (cid:4) 54(cid:21),(cid:23)0(cid:21) (cid:4) 5(cid:23)4,95(cid:21) (cid:4) 531,9(cid:22)(cid:23) Gross profit . . . . . . . . . . . . . . 159,(cid:23)(cid:21)0 293,015 13(cid:22),4(cid:21)0 90,33(cid:23) 333,555 13(cid:23),3(cid:21)3 Production start(cid:12)up . . . . . . . . 1(cid:21),(cid:22)1(cid:21) 13,019 Litigation loss . . . . . . . . . . . . (cid:86) (cid:86) Operating income (loss) . . . . 5(cid:22),(cid:22)(cid:22)4 20(cid:22),1(cid:21)3 Net income (loss) . . . . . . . . . 115,(cid:22)03 155,03(cid:22) (cid:21),311 (cid:21),000 50,(cid:23)9(cid:21) 3(cid:21),911 4,4(cid:23)2 (cid:22),351 1(cid:23),(cid:21)05 (cid:86) 3(cid:21)3,000 1,(cid:21)5(cid:21) (11(cid:22),(cid:23)(cid:21)(cid:21)) 90,(cid:22)04 (59,40(cid:23)) (cid:86) 41,304 30,(cid:21)22 (cid:22)(cid:22),1(cid:23)2 10,43(cid:22) (cid:86) 112 9,522 (cid:86) ((cid:23),5(cid:23)4) ((cid:22)(cid:21),(cid:21)39) (1(cid:23),54(cid:23)) ((cid:21)(cid:22),599) Net income (loss) per share: Basic . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . (cid:4) (cid:4) 1.09 (cid:4) 1.4(cid:21) (cid:4) 0.35 (cid:4) 0.(cid:23)(cid:21) (cid:4) (0.5(cid:21)) (cid:4) 0.29 (cid:4) (0.1(cid:23)) (cid:4) 1.0(cid:23) (cid:4) 1.45 (cid:4) 0.35 (cid:4) 0.(cid:23)5 (cid:4) (0.5(cid:21)) (cid:4) 0.29 (cid:4) (0.1(cid:23)) (cid:4) (0.(cid:21)4) (0.(cid:21)4) Ite(cid:60) (cid:20). (cid:15)(cid:42)a(cid:48)(cid:41)(cid:39)(cid:53) (cid:43)(cid:48) a(cid:48)(cid:38) (cid:16)(cid:43)(cid:53)a(cid:41)r(cid:39)(cid:39)m(cid:39)(cid:48)(cid:54)(cid:53) (cid:57)(cid:43)(cid:54)(cid:42) (cid:13)(cid:37)(cid:37)ou(cid:48)(cid:54)a(cid:48)(cid:54)(cid:53) o(cid:48) (cid:13)(cid:37)(cid:37)ou(cid:48)(cid:54)(cid:43)(cid:48)(cid:41) a(cid:48)(cid:38) F(cid:43)(cid:48)a(cid:48)(cid:37)(cid:43)a(cid:46) (cid:16)(cid:43)(cid:53)(cid:37)(cid:46)o(cid:53)ur(cid:39) None. Ite(cid:60) (cid:20)A. (cid:15)o(cid:48)(cid:54)ro(cid:46)(cid:53) a(cid:48)(cid:38) (cid:27)ro(cid:37)(cid:39)(cid:38)ur(cid:39)(cid:53) E(cid:69)aluati(cid:62)n (cid:62)(cid:53) Di(cid:66)(cid:50)l(cid:62)(cid:66)ure C(cid:62)ntr(cid:62)l(cid:66) an(cid:51) (cid:38)r(cid:62)(cid:50)e(cid:51)ure(cid:66) We carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our (cid:87)disclosure controls and procedures(cid:88) as defined in Exchange Act Rule 13a(cid:12)15(e) and 15d(cid:12)15(e). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of December 31, 2020 our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. (cid:22)(cid:21) (cid:35)anage(cid:60)ent(cid:74)(cid:66) Re(cid:63)(cid:62)rt (cid:62)n Internal C(cid:62)ntr(cid:62)l (cid:62)(cid:69)er Finan(cid:50)ial Re(cid:63)(cid:62)rting Our management is responsible for establishing and maintaining adequate (cid:87)internal control over financial reporting,(cid:88) as defined in Exchange Act Rule 13a(cid:12)15(f) and 15d(cid:12)15(f). We also carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our internal control over financial reporting as of December 31, 2020 based on the criteria established in (cid:23)nterna(cid:47) Contro(cid:47) (cid:63) (cid:23)ntegrated (cid:20)rame(cid:58)ork (cid:3)(cid:11)(cid:9)(cid:10)(cid:12)(cid:4) issued by the Committee of Sponsoring Organizations of the Treadway Commission ((cid:87)COSO(cid:88)). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Based on such evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2020. The effectiveness of our internal control over financial reporting as of December 31, 2020 has also been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in its report which appears herein. C(cid:55)ange(cid:66) in Internal C(cid:62)ntr(cid:62)l (cid:62)(cid:69)er Finan(cid:50)ial Re(cid:63)(cid:62)rting We also carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of our (cid:87)internal control over financial reporting(cid:88) to determine whether any changes in our internal control over financial reporting occurred during the quarter ended December 31, 2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, there were no such changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020. Li(cid:60)itati(cid:62)n(cid:66) (cid:62)n t(cid:55)e E(cid:53)(cid:53)e(cid:50)ti(cid:69)ene(cid:66)(cid:66) (cid:62)(cid:53) C(cid:62)ntr(cid:62)l(cid:66) Control systems, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control systems(cid:89) ob(cid:61)ectives are being met. Further, the design of any system of controls must reflect the fact that there are resource constraints, and the benefits of all controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include the realities that (cid:61)udgments in decision(cid:12)making can be faulty and that breakdowns can occur because of error or mistake. Control systems can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Ite(cid:60) (cid:20)(cid:24). (cid:26)(cid:54)(cid:42)(cid:39)r (cid:20)(cid:48)(cid:40)orma(cid:54)(cid:43)o(cid:48) None. (cid:22)(cid:22) Item 1(cid:9). Directors, Executive (cid:19)(cid:32)(cid:32)icers, and Corporate (cid:12)overnance PART III For information with respect to our executive officers, see Item 1. “Business (cid:83) Information about Our Executive Officers.” Information concerning our board of directors and audit committee of our board of directors will appear in our 2021 Proxy Statement, under the sections “(cid:30)irectors” and “Corporate Governance,” and information concerning Section 1(cid:21)(a) beneficial ownership reporting compliance will appear in our 2021 Proxy Statement under the section “Section 1(cid:21)(a) Beneficial Ownership Reporting Compliance.” (cid:49)e have adopted a Code of Business Conduct and Ethics that applies to all directors, officers, and associates of First Solar. Information concerning this code will appear in our 2021 Proxy Statement under the section “Corporate Governance.” The information in such sections of the Proxy Statement is incorporated by reference into this Annual Report on Form 10-K. Item 11. Executive Compensation Information concerning executive compensation and related information will appear in our 2021 Proxy Statement under the section “Executive Compensation,” and information concerning the compensation committee of our board of directors (the “compensation committee”) will appear under the sections “Corporate Governance” and “Compensation Committee Report.” The information in such sections of the 2021 Proxy Statement is incorporated by reference into this Annual Report on Form 10-K. Item 1(cid:11). Securit(cid:51) (cid:19)(cid:49)nership o(cid:32) Certain (cid:7)ene(cid:32)icial (cid:19)(cid:49)ners and (cid:17)anagement and Related Stoc(cid:37)holder (cid:17)atters Information concerning the security ownership of certain beneficial owners and management and related stockholder matters, including certain information regarding our equity compensation plans, will appear in our 2021 Proxy Statement under the section “Security Ownership of Certain Beneficial Owners and (cid:39)anagement and Related Stockholder (cid:39)atters.” The information in such section of the Proxy Statement is incorporated by reference into this Annual Report on Form 10-K. (cid:24)(cid:60)(cid:64)(cid:52)t(cid:68) (cid:22)(cid:58)m(cid:59)e(cid:57)(cid:62)(cid:44)t(cid:52)(cid:58)(cid:57) P(cid:55)(cid:44)(cid:57)(cid:62) The following table sets forth certain information as of (cid:30)ecember (cid:18)1, 2020 concerning securities authori(cid:77)ed for issuance under our equity compensation plans: (cid:32)(cid:64)m(cid:45)e(cid:61) (cid:58)(cid:49) (cid:37)e(cid:46)(cid:64)(cid:61)(cid:52)t(cid:52)e(cid:62) t(cid:58) (cid:45)e I(cid:62)(cid:62)(cid:64)e(cid:47) (cid:39)(cid:59)(cid:58)(cid:57) (cid:24)(cid:67)e(cid:61)(cid:46)(cid:52)(cid:62)e (cid:58)(cid:49) (cid:33)(cid:64)t(cid:62)t(cid:44)(cid:57)(cid:47)(cid:52)(cid:57)(cid:50) (cid:33)(cid:59)t(cid:52)(cid:58)(cid:57)(cid:62) (cid:44)(cid:57)(cid:47) R(cid:52)(cid:50)(cid:51)t(cid:62) (cid:4)(cid:44)(cid:5)(cid:4)1(cid:5) (cid:41)e(cid:52)(cid:50)(cid:51)te(cid:47)(cid:7)A(cid:65)e(cid:61)(cid:44)(cid:50)e (cid:24)(cid:67)e(cid:61)(cid:46)(cid:52)(cid:62)e P(cid:61)(cid:52)(cid:46)e (cid:58)(cid:49) (cid:33)(cid:64)t(cid:62)t(cid:44)(cid:57)(cid:47)(cid:52)(cid:57)(cid:50) (cid:33)(cid:59)t(cid:52)(cid:58)(cid:57)(cid:62) (cid:44)(cid:57)(cid:47) R(cid:52)(cid:50)(cid:51)t(cid:62) (cid:4)(cid:45)(cid:5)(cid:4)(cid:11)(cid:5) 1,(cid:23)(cid:20)2,2(cid:20)(cid:21) (cid:84) 1,(cid:23)(cid:20)2,2(cid:20)(cid:21) (cid:4) (cid:4) (cid:84) (cid:84) (cid:84) (cid:32)(cid:64)m(cid:45)e(cid:61) (cid:58)(cid:49) (cid:37)e(cid:46)(cid:64)(cid:61)(cid:52)t(cid:52)e(cid:62) Rem(cid:44)(cid:52)(cid:57)(cid:52)(cid:57)(cid:50) A(cid:65)(cid:44)(cid:52)(cid:55)(cid:44)(cid:45)(cid:55)e (cid:49)(cid:58)(cid:61) (cid:25)(cid:64)t(cid:64)(cid:61)e I(cid:62)(cid:62)(cid:64)(cid:44)(cid:57)(cid:46)e (cid:39)(cid:57)(cid:47)e(cid:61) (cid:24)(cid:60)(cid:64)(cid:52)t(cid:68) (cid:22)(cid:58)m(cid:59)e(cid:57)(cid:62)(cid:44)t(cid:52)(cid:58)(cid:57) P(cid:55)(cid:44)(cid:57)(cid:62) (cid:4)(cid:24)(cid:67)(cid:46)(cid:55)(cid:64)(cid:47)(cid:52)(cid:57)(cid:50) (cid:37)e(cid:46)(cid:64)(cid:61)(cid:52)t(cid:52)e(cid:62) Re(cid:49)(cid:55)e(cid:46)te(cid:47) (cid:52)(cid:57) (cid:22)(cid:58)(cid:55)(cid:64)m(cid:57) (cid:4)(cid:44)(cid:5)(cid:5) (cid:4)(cid:46)(cid:5) (cid:21),(cid:21)0(cid:23),(cid:23)77 (cid:84) (cid:21),(cid:21)0(cid:23),(cid:23)77 P(cid:55)(cid:44)(cid:57) (cid:22)(cid:44)te(cid:50)(cid:58)(cid:61)(cid:68) Equity compensation plans approved by stockholders . . . . . . Equity compensation plans not approved by stockholders . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:84)(cid:84)(cid:84)(cid:84)(cid:84)(cid:84)(cid:84)(cid:84)(cid:84)(cid:84) (1) Includes 1,(cid:23)(cid:20)2,2(cid:20)(cid:21) shares issuable upon vesting of restricted stock units (“RSUs”) granted under our 2020 Omnibus Incentive Compensation Plan (“2020 Omnibus Plan”). (2) The weighted-average exercise price does not take into account the shares issuable upon vesting of outstanding RSUs, which have no exercise price. See Note 1(cid:21). “Share-Based Compensation” to our consolidated financial statements for further discussion on our equity compensation plans. 7(cid:23) Item 13. Certain Relationships and Related Transactions, and Director Independence Information concerning certain relationships and related party transactions will appear in our 2021 Proxy Statement under the section “Certain Relationships and Related Party Transactions,” and information concerning director independence will appear in our 2021 Proxy Statement under the section “Corporate Governance.” The information in such sections of the Proxy Statement is incorporated by reference into this Annual Report on Form 10-K. Item 14. Principal Accounting Fees and Services Information concerning principal accounting fees and services and the audit committee of our board of directors’ pre-approval policies and procedures for these items will appear in our 2021 Proxy Statement under the section “Principal Accounting Fees and Services.” The information in such section of the Proxy Statement is incorporated by reference into this Annual Report on Form 10-K. Item 15. Exhibits and Financial Statement Schedules PART IV (a) Documents. The following documents are filed as part of this Annual Report on Form 10-K: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Comprehensive Income Consolidated Statements of Stockholders’ Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements (b) Exhibits. Unless otherwise noted, the exhibits listed on the accompanying Index to Exhibits are filed with or incorporated by reference into this Annual Report on Form 10-K. (c) Financial Statement Schedules. All financial statement schedules have been omitted as the required information is not applicable or is not material to require presentation of the schedule, or because the information required is included in the consolidated financial statements and notes thereto of this Annual Report on Form 10-K. 79 Re(cid:63)(cid:62)rt (cid:62)(cid:53) In(cid:51)e(cid:63)en(cid:51)ent Regi(cid:66)tere(cid:51) (cid:38)u(cid:49)li(cid:50) A(cid:50)(cid:50)(cid:62)unting Fir(cid:60) To the Board of Directors and Stockholders of First Solar, Inc. (cid:26)(cid:50)(cid:43)(cid:48)(cid:43)o(cid:48)(cid:53) o(cid:48) (cid:54)(cid:42)(cid:39) F(cid:43)(cid:48)a(cid:48)(cid:37)(cid:43)a(cid:46) S(cid:54)a(cid:54)(cid:39)m(cid:39)(cid:48)(cid:54)(cid:53) a(cid:48)(cid:38) (cid:20)(cid:48)(cid:54)(cid:39)r(cid:48)a(cid:46) (cid:15)o(cid:48)(cid:54)ro(cid:46) o(cid:56)(cid:39)r F(cid:43)(cid:48)a(cid:48)(cid:37)(cid:43)a(cid:46) (cid:29)(cid:39)(cid:50)or(cid:54)(cid:43)(cid:48)(cid:41) We have audited the accompanying consolidated balance sheets of First Solar, Inc. and its subsidiaries ((cid:87)the Company(cid:88)) as of December 31, 2020 and 2019, and the related consolidated statements of operations, comprehensive income, stockholders(cid:89) equity and cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the (cid:87)consolidated financial statements(cid:88)). We also have audited the Company(cid:89)s internal control over financial reporting as of December 31, 2020, based on criteria established in (cid:23)nterna(cid:47) Contro(cid:47) (cid:63) (cid:23)ntegrated (cid:20)rame(cid:58)ork (cid:3)(cid:11)(cid:9)(cid:10)(cid:12)(cid:4) issued by the Committee of Sponsoring Organizations of the Treadway Commission ((cid:87)COSO(cid:88)). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in (cid:23)nterna(cid:47) Contro(cid:47) (cid:63) (cid:23)ntegrated (cid:20)rame(cid:58)ork (cid:3)(cid:11)(cid:9)(cid:10)(cid:12)(cid:4) issued by the COSO. (cid:14)a(cid:53)(cid:43)(cid:53) (cid:40)or (cid:26)(cid:50)(cid:43)(cid:48)(cid:43)o(cid:48)(cid:53) The Company(cid:89)s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management(cid:89)s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company(cid:89)s consolidated financial statements and on the Company(cid:89)s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ((cid:87)PCAOB(cid:88)) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission ((cid:87)SEC(cid:88)) and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. (cid:23)0 (cid:16)(cid:39)(cid:40)(cid:43)(cid:48)(cid:43)(cid:54)(cid:43)o(cid:48) a(cid:48)(cid:38) (cid:23)(cid:43)m(cid:43)(cid:54)a(cid:54)(cid:43)o(cid:48)(cid:53) o(cid:40) (cid:20)(cid:48)(cid:54)(cid:39)r(cid:48)a(cid:46) (cid:15)o(cid:48)(cid:54)ro(cid:46) o(cid:56)(cid:39)r F(cid:43)(cid:48)a(cid:48)(cid:37)(cid:43)a(cid:46) (cid:29)(cid:39)(cid:50)or(cid:54)(cid:43)(cid:48)(cid:41) A company(cid:89)s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company(cid:89)s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company(cid:26) (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company(cid:26) and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company(cid:89)s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, pro(cid:61)ections of any evaluation of effectiveness to future periods are sub(cid:61)ect to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. (cid:15)r(cid:43)(cid:54)(cid:43)(cid:37)a(cid:46) (cid:13)u(cid:38)(cid:43)(cid:54) (cid:24)a(cid:54)(cid:54)(cid:39)r(cid:53) The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, sub(cid:61)ective, or complex (cid:61)udgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. (cid:31)o(cid:47)ar (cid:26)odu(cid:47)e Co(cid:47)(cid:47)ection and Rec(cid:60)c(cid:47)ing (cid:25)ia(cid:37)i(cid:47)it(cid:60) As described in Note 11 to the consolidated financial statements, certain of the Company(cid:89)s legacy sales were covered by a module collection and recycling program, which was previously established to collect and recycle modules sold and covered under such program once the modules reach the end of their useful lives. The Company(cid:89)s accrued solar module collection and recycling liability was (cid:4)130.(cid:22) million as of December 31, 2020. Management estimates the cost of collection and recycling obligations based on the present value of the expected future cost of collecting and recycling the solar modules, which includes estimates for the cost of packaging materials(cid:26) the cost of freight from the solar module installation sites to a recycling center(cid:26) material, labor, and capital costs(cid:26) and by(cid:12) product credits for certain materials recovered during the recycling process. Management bases these estimates on experience collecting and recycling the solar modules and certain assumptions regarding costs at the time the solar modules will be collected and recycled. The principal considerations for our determination that performing procedures relating to the solar module collection and recycling liability is a critical audit matter are (i) the significant (cid:61)udgment by management when developing the estimated costs of this program(cid:26) and (ii) a high degree of auditor (cid:61)udgment, sub(cid:61)ectivity, and effort in performing procedures to evaluate audit evidence related to management(cid:89)s significant assumptions related to the cost of freight from the solar module installation sites to a recycling center, capital costs, present value assumptions, and the assumption regarding costs at the time the solar modules will be collected and recycled, and evaluating audit evidence related to the results of those procedures. (cid:23)1 Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to valuation of the solar module collection and recycling liability. These procedures also included, among others, testing management(cid:89)s process for developing the expected future cost of collecting and recycling the solar modules including evaluating the reasonableness of the significant assumptions used by management related to the cost of freight from the solar module installation sites to a recycling center, capital costs, present value assumptions, and the assumption regarding costs at the time the solar modules will be collected and recycled. Evaluating the reasonableness of the significant assumptions involved (i) testing actual recycling costs incurred, (ii) obtaining and evaluating evidence from third parties, and (iii) evaluating other underlying input data considered by management in the development of its recycling liability. Product (cid:35)arrant(cid:60) (cid:25)ia(cid:37)i(cid:47)it(cid:60) As described in Notes 2 and 13 to the consolidated financial statements, the Company provides a limited P(cid:48) solar module warranty which covers defects in materials and workmanship for up to 12 years and warrants that modules will produce at least a specified minimum percentage of their labeled power output rating, on either an individual module or system(cid:12)level basis, for up to 30 years. The Company(cid:89)s product warranty liability was (cid:4)95.1 million as of December 31, 2020. Product warranty estimates are based primarily on the number of solar modules under warranty installed at customer locations, historical experience with and pro(cid:61)ections of warranty claims, and estimated per(cid:12) module replacement costs. The principal considerations for our determination that performing procedures relating to the product warranty liability is a critical audit matter are (i) the significant (cid:61)udgment by management in estimating the pro(cid:61)ections of warranty claims(cid:26) and (ii) a high degree of auditor (cid:61)udgment, sub(cid:61)ectivity, and effort in performing procedures to evaluate the pro(cid:61)ections of warranty claims and related audit evidence. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to valuation of the product warranty liability. These procedures also included, among others, testing the appropriateness of the methodology used and the reasonableness of the significant assumptions used by management in developing these estimates related to pro(cid:61)ections of warranty claims. Evaluating whether the significant assumptions relating to the product warranty liability were reasonable involved (i) testing historical warranty claims and settlements, (ii) evaluating the reasonableness and appropriateness of factors considered by management in estimating the final settlement of open customer claims, and (iii) evaluating the reasonableness and appropriateness of the methodology used by management to determine return rates used in the valuation of the product warranty liability. /s/ PricewaterhouseCoopers LLP Phoenix, Arizona February 25, 2021 We have served as the Company(cid:89)s or its predecessor(cid:89)s auditor since 2000, which includes periods before the Company became sub(cid:61)ect to SEC reporting requirements. (cid:23)2 FIRST SOLAR, INC. AND SU(cid:24)SIDIARIES CONSOLIDATED (cid:24)ALANCE S(cid:30)EETS (cid:4)In t(cid:55)(cid:62)u(cid:66)an(cid:51)(cid:66), e(cid:71)(cid:50)e(cid:63)t (cid:66)(cid:55)are (cid:51)ata(cid:5) Current assets: ASSETS Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Marketable securities (amortized cost of (cid:4)519,(cid:23)44 and allowance for credit losses of (cid:4)121 at December 31, 2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable trade, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable, unbilled and retainage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable, unbilled and retainage, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance of systems parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pro(cid:61)ect assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P(cid:48) solar power systems, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pro(cid:61)ect assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restricted marketable securities (amortized cost of (cid:4)24(cid:22),(cid:21)2(cid:23) and allowance for credit losses of (cid:4)13 at December 31, 2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) LIA(cid:24)ILITIES AND STOC(cid:33)(cid:30)OLDERS(cid:74) E(cid:39)UIT(cid:47) Current liabilities: Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current portion of long(cid:12)term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued solar module collection and recycling liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long(cid:12)term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commitments and contingencies Stockholders(cid:89) equity: De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:4) 1,22(cid:22),002 (cid:4) 1,352,(cid:22)41 520,0(cid:21)(cid:21) 2(cid:21)9,095 (3,009) 2(cid:21)(cid:21),0(cid:23)(cid:21) 2(cid:21),(cid:21)(cid:22)3 (303) 2(cid:21),3(cid:22)0 5(cid:21)(cid:22),5(cid:23)(cid:22) 30 (cid:86) 155,(cid:21)(cid:23)5 251,(cid:22)09 3,014,535 2,402,2(cid:23)5 243,39(cid:21) 3(cid:22)3,3(cid:22)(cid:22) 104,099 2(cid:21)5,2(cid:23)0 14,4(cid:21)2 5(cid:21),13(cid:23) 201,229 434,130 (cid:22),10(cid:23),931 (cid:4) 1(cid:23)3,349 (cid:4) 14,5(cid:22)1 310,4(cid:21)(cid:22) 41,540 1(cid:23)(cid:23),(cid:23)13 (cid:86) 25,(cid:21)21 (cid:23)3,03(cid:22) (cid:23)4(cid:22),39(cid:23) 130,(cid:21)(cid:23)(cid:23) 23(cid:22),(cid:21)91 3(cid:22)2,22(cid:21) 1,5(cid:23)(cid:23),003 (cid:23)11,50(cid:21) 4(cid:22)(cid:21),425 (1,3(cid:23)(cid:21)) 4(cid:22)5,039 1(cid:23)3,4(cid:22)3 (cid:86) 1(cid:23)3,4(cid:22)3 443,513 53,5(cid:23)3 3,524 (cid:86) 2(cid:22)(cid:21),455 3,599,(cid:23)34 2,1(cid:23)1,149 4(cid:22)(cid:21),9(cid:22)(cid:22) 333,59(cid:21) 130,(cid:22)(cid:22)1 223,(cid:22)(cid:23)5 14,4(cid:21)2 (cid:21)4,543 1(cid:21)0,(cid:21)4(cid:21) 329,92(cid:21) (cid:22),515,(cid:21)(cid:23)9 21(cid:23),0(cid:23)1 1(cid:22),010 351,2(cid:21)0 1(cid:22),510 323,21(cid:22) 3(cid:21)3,000 (cid:86) 2(cid:23),130 1,31(cid:23),20(cid:23) 13(cid:22),(cid:22)(cid:21)1 454,1(cid:23)(cid:22) 50(cid:23),(cid:22)(cid:21)(cid:21) 2,41(cid:23),922 Common stock, (cid:4)0.001 par value per share(cid:26) 500,000,000 shares authorized(cid:26) 105,9(cid:23)0,4(cid:21)(cid:21) and 105,44(cid:23),921 shares issued and outstanding at December 31, 2020 and 2019, respectively . . . . . . . . . . . . . . . . . . . . . . . . Additional paid(cid:12)in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total stockholders(cid:89) equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities and stockholders(cid:89) equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) 10(cid:21) 2,(cid:23)(cid:21)(cid:21),(cid:22)(cid:23)(cid:21) 2,(cid:22)15,(cid:22)(cid:21)2 ((cid:21)1,(cid:22)2(cid:21)) 5,520,92(cid:23) (cid:22),10(cid:23),931 (cid:4) 105 2,(cid:23)49,3(cid:22)(cid:21) 2,32(cid:21),(cid:21)20 ((cid:22)9,334) 5,09(cid:21),(cid:22)(cid:21)(cid:22) (cid:22),515,(cid:21)(cid:23)9 See accompanying notes to these consolidated financial statements. (cid:23)3 FIRST SOLAR, INC. AND SU(cid:24)SIDIARIES CONSOLIDATED STATE(cid:35)ENTS OF O(cid:38)ERATIONS (cid:4)In t(cid:55)(cid:62)u(cid:66)an(cid:51)(cid:66), e(cid:71)(cid:50)e(cid:63)t (cid:63)er (cid:66)(cid:55)are a(cid:60)(cid:62)unt(cid:66)(cid:5) (cid:47)ear(cid:66) En(cid:51)e(cid:51) De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses: Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Production start(cid:12)up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Litigation loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency (loss) income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other (expense) income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) before taxes and equity in earnings . . . . . . . . . . . . . . . . . . . . . . . Income tax benefit (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity in earnings, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income (loss) per share: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted(cid:12)average number of shares used in per share calculations: (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:4) 2,(cid:22)11,332 (cid:4) 3,0(cid:21)3,11(cid:22) (cid:4) 2,244,044 1,(cid:23)51,(cid:23)(cid:21)(cid:22) 392,1(cid:22)(cid:22) 2,513,905 549,212 2,030,(cid:21)59 (cid:21)(cid:23)0,(cid:21)(cid:22)3 (cid:13)(cid:11)(cid:12)(cid:19) 222,91(cid:23) 93,(cid:22)3(cid:23) 40,52(cid:23) (cid:21),000 3(cid:21)3,1(cid:23)4 31(cid:22),4(cid:23)9 (4,(cid:23)90) 1(cid:21),559 (24,03(cid:21)) (11,932) 293,190 10(cid:22),294 (2,129) 39(cid:23),355 (cid:4) 205,4(cid:22)1 9(cid:21),(cid:21)11 45,915 3(cid:21)3,000 (cid:22)10,99(cid:22) (1(cid:21)1,(cid:22)(cid:23)5) 2,291 4(cid:23),(cid:23)(cid:23)(cid:21) (2(cid:22),0(cid:21)(cid:21)) 1(cid:22),545 (120,129) 5,4(cid:23)0 (2(cid:23)4) (114,933) (cid:4) 1(cid:22)(cid:21),(cid:23)5(cid:22) (cid:23)4,4(cid:22)2 90,(cid:22)35 (cid:86) 352,0(cid:21)4 40,113 (5(cid:22)0) 59,(cid:22)(cid:23)(cid:23) (25,921) 39,(cid:22)3(cid:22) 113,14(cid:22) (3,441) 34,(cid:21)20 144,32(cid:21) 3.(cid:22)(cid:21) (cid:4) 3.(cid:22)3 (cid:4) (1.09) (cid:4) (1.09) (cid:4) 1.3(cid:23) 1.3(cid:21) (cid:4) (cid:4) (cid:4) Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,(cid:23)(cid:21)(cid:22) 10(cid:21),(cid:21)(cid:23)(cid:21) 105,310 105,310 104,(cid:22)45 10(cid:21),113 See accompanying notes to these consolidated financial statements. (cid:23)4 FIRST SOLAR, INC. AND SU(cid:24)SIDIARIES CONSOLIDATED STATE(cid:35)ENTS OF CO(cid:35)(cid:38)RE(cid:30)ENSI(cid:44)E INCO(cid:35)E (cid:4)In t(cid:55)(cid:62)u(cid:66)an(cid:51)(cid:66)(cid:5) Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other comprehensive income (loss): (cid:4) Foreign currency translation ad(cid:61)ustments . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrealized gain (loss) on marketable securities and restricted marketable securities, net of tax of (cid:4)(1,231), (cid:4)3,04(cid:21), and (cid:4)3,(cid:22)35 . . . . . . . . . . . . . . . Unrealized (loss) gain on derivative instruments, net of tax of (cid:4)(31), (cid:4)142, and (cid:4)(99(cid:21)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:47)ear(cid:66) En(cid:51)e(cid:51) De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:13)(cid:11) 39(cid:23),355 (cid:4) (cid:13)(cid:11)(cid:12)(cid:20) (114,933) (cid:4) (cid:13)(cid:11)(cid:12)(cid:19) 144,32(cid:21) (2,(cid:23)10) ((cid:22),049) (1,034) 21,(cid:21)59 (15,(cid:21)(cid:22)0) (5(cid:22),(cid:22)4(cid:22)) (1,241) 1(cid:22),(cid:21)0(cid:23) 415,9(cid:21)3 (cid:4) (2,149) (24,(cid:23)(cid:21)(cid:23)) (139,(cid:23)01) (cid:4) 2,05(cid:21) (5(cid:21),(cid:22)25) (cid:23)(cid:22),(cid:21)01 (cid:4) See accompanying notes to these consolidated financial statements. (cid:23)5 FIRST SOLAR, INC. AND SU(cid:24)SIDIARIES CONSOLIDATED STATE(cid:35)ENTS OF STOC(cid:33)(cid:30)OLDERS(cid:74) E(cid:39)UIT(cid:47) (cid:4)In t(cid:55)(cid:62)u(cid:66)an(cid:51)(cid:66)(cid:5) C(cid:62)(cid:60)(cid:60)(cid:62)n St(cid:62)(cid:50)(cid:58) S(cid:55)are(cid:66) A(cid:60)(cid:62)unt A(cid:51)(cid:51)iti(cid:62)nal (cid:38)ai(cid:51)(cid:8)In Ca(cid:63)ital A(cid:50)(cid:50)u(cid:60)ulate(cid:51) Earning(cid:66) A(cid:50)(cid:50)u(cid:60)ulate(cid:51) Ot(cid:55)er C(cid:62)(cid:60)(cid:63)re(cid:55)en(cid:66)i(cid:69)e (cid:4)L(cid:62)(cid:66)(cid:66)(cid:5) In(cid:50)(cid:62)(cid:60)e T(cid:62)tal E(cid:64)uit(cid:72) Balance at December 31, 201(cid:22) . . . . . Net income . . . . . . . . . . . . . . . . . Other comprehensive loss . . . . . . Common stock issued for share(cid:12) based compensation . . . . . . . 104,4(cid:21)(cid:23) (cid:4) (cid:86) (cid:86) 5(cid:23)(cid:23) Tax withholding related to vesting of restricted stock . . . (1(cid:22)1) Share(cid:12)based compensation expense . . . . . . . . . . . . . . . . . Balance at December 31, 201(cid:23) . . . . . Net loss . . . . . . . . . . . . . . . . . . . . Other comprehensive loss . . . . . . Common stock issued for share(cid:12) based compensation . . . . . . . (cid:86) 104,(cid:23)(cid:23)5 (cid:86) (cid:86) (cid:23)(cid:21)9 Tax withholding related to vesting of restricted stock . . . (305) 104 (cid:4) 2,(cid:22)99,10(cid:22) (cid:4) 2,29(cid:22),22(cid:22) (cid:4) (cid:86) (cid:86) 144,32(cid:21) (cid:86) (cid:86) (cid:86) 1 (cid:86) (cid:86) 105 (cid:86) (cid:86) 1 (1) 3,425 (11,1(cid:22)5) 33,(cid:23)54 2,(cid:23)25,211 (cid:86) (cid:86) 3,433 (1(cid:21),0(cid:23)9) (cid:86) (cid:86) (cid:86) 2,441,553 (114,933) (cid:86) (cid:86) (cid:86) 2,259 (cid:4) 5,09(cid:23),(cid:21)9(cid:22) 144,32(cid:21) (5(cid:21),(cid:22)25) (cid:86) (5(cid:21),(cid:22)25) (cid:86) (cid:86) (cid:86) (54,4(cid:21)(cid:21)) (cid:86) (24,(cid:23)(cid:21)(cid:23)) (cid:86) (cid:86) 3,42(cid:21) (11,1(cid:22)5) 33,(cid:23)54 5,212,403 (114,933) (24,(cid:23)(cid:21)(cid:23)) 3,434 (1(cid:21),090) (cid:86) 105,449 (cid:86) 105 3(cid:21),(cid:23)21 2,(cid:23)49,3(cid:22)(cid:21) (cid:86) 2,32(cid:21),(cid:21)20 (cid:86) ((cid:22)9,334) 3(cid:21),(cid:23)21 5,09(cid:21),(cid:22)(cid:21)(cid:22) Share(cid:12)based compensation expense . . . . . . . . . . . . . . . . . Balance at December 31, 2019 . . . . . Cumulative(cid:12)effect ad(cid:61)ustment for the adoption of ASU 201(cid:21)(cid:12)13 Net income . . . . . . . . . . . . . . . . . Other comprehensive income . . . Common stock issued for share(cid:12) based compensation . . . . . . . (cid:86) (cid:86) (cid:86) (cid:23)14 Tax withholding related to vesting of restricted stock . . . (2(cid:23)3) Share(cid:12)based compensation expense . . . . . . . . . . . . . . . . . Balance at December 31, 2020 . . . . . (cid:86) (cid:86) 105,9(cid:23)0 (cid:4) (cid:86) (cid:86) (cid:86) 1 (cid:86) (cid:86) (cid:86) (cid:86) (9,213) 39(cid:23),355 (cid:86) 1,3(cid:21)2 (13,11(cid:23)) 29,1(cid:21)(cid:21) (cid:86) (cid:86) (cid:86) 10(cid:21) (cid:4) 2,(cid:23)(cid:21)(cid:21),(cid:22)(cid:23)(cid:21) (cid:4) 2,(cid:22)15,(cid:22)(cid:21)2 (cid:4) (cid:86) (cid:86) 1(cid:22),(cid:21)0(cid:23) (cid:86) (cid:86) (9,213) 39(cid:23),355 1(cid:22),(cid:21)0(cid:23) 1,3(cid:21)3 (13,11(cid:23)) (cid:86) 29,1(cid:21)(cid:21) ((cid:21)1,(cid:22)2(cid:21)) (cid:4) 5,520,92(cid:23) See accompanying notes to these consolidated financial statements. (cid:23)(cid:21) FIRST SOLAR, INC. AND SU(cid:24)SIDIARIES CONSOLIDATED STATE(cid:35)ENTS OF CAS(cid:30) FLO(cid:45)S (cid:4)In t(cid:55)(cid:62)u(cid:66)an(cid:51)(cid:66)(cid:5) Ca(cid:66)(cid:55) (cid:53)l(cid:62)(cid:70)(cid:66) (cid:53)r(cid:62)(cid:60) (cid:62)(cid:63)erating a(cid:50)ti(cid:69)itie(cid:66)(cid:21) Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ad(cid:61)ustments to reconcile net income (loss) to cash provided by (used in) operating activities: (cid:47)ear(cid:66) En(cid:51)e(cid:51) De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:19) (cid:4) 39(cid:23),355 (cid:4) (114,933) (cid:4) 144,32(cid:21) Depreciation, amortization and accretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232,925 Impairments and net losses on disposal of long(cid:12)lived assets . . . . . . . . . . . . . . . . . . . . Share(cid:12)based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity in earnings, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distributions received from equity method investments . . . . . . . . . . . . . . . . . . . . . . . Remeasurement of monetary assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gains on sales of marketable securities and restricted marketable securities . . . . . . . Liabilities assumed by customers for the sale of systems . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in operating assets and liabilities: Accounts receivable, trade, unbilled and retainage . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories and balance of systems parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pro(cid:61)ect assets and P(cid:48) solar power systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax receivable and payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued solar module collection and recycling liability . . . . . . . . . . . . . . . . . . . . Net cash provided by (used in) operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ca(cid:66)(cid:55) (cid:53)l(cid:62)(cid:70)(cid:66) (cid:53)r(cid:62)(cid:60) in(cid:69)e(cid:66)ting a(cid:50)ti(cid:69)itie(cid:66)(cid:21) Purchases of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchases of marketable securities and restricted marketable securities . . . . . . . . . . . Proceeds from sales and maturities of marketable securities and restricted marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from sales of equity method investments . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments received on notes receivable, affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ca(cid:66)(cid:55) (cid:53)l(cid:62)(cid:70)(cid:66) (cid:53)r(cid:62)(cid:60) (cid:53)inan(cid:50)ing a(cid:50)ti(cid:69)itie(cid:66)(cid:21) Repayment of long(cid:12)term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from borrowings under long(cid:12)term debt, net of discounts and issuance costs Payments of tax withholdings for restricted shares . . . . . . . . . . . . . . . . . . . . . . . . . . . Other financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash (used in) provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Effect of exchange rate changes on cash, cash equivalents and restricted cash . . . . . . . . . Net decrease in cash, cash equivalents and restricted cash . . . . . . . . . . . . . . . . . . . . . . . . Cash, cash equivalents and restricted cash, beginning of the period . . . . . . . . . . . . . . . . . 35,(cid:23)0(cid:21) 29,2(cid:21)(cid:22) 2,129 (cid:86) 1,359 3(cid:21),013 (15,34(cid:21)) (13(cid:21),(cid:22)45) 15,(cid:23)09 345,150 (992) (145,39(cid:21)) 10(cid:21),(cid:23)(cid:21)(cid:22) (32,0(cid:22)3) (1(cid:22)(cid:22),431) (43,2(cid:23)5) ((cid:21)0(cid:21),111) (9,1(cid:23)1) 3(cid:22),120 205,4(cid:22)5 (cid:22),5(cid:22)(cid:22) 3(cid:22),429 2(cid:23)4 (cid:86) 919 (59,91(cid:22)) (40,(cid:21)21) ((cid:23)(cid:23),050) (cid:22)59 ((cid:22)3,594) (34,52(cid:23)) ((cid:23)3,52(cid:23)) (20,(cid:22)(cid:22)3) 2(cid:23),(cid:22)2(cid:23) (cid:23),035 (33(cid:21)) 39(cid:22),52(cid:22) 3,(cid:22)4(cid:23) 1(cid:22)4,201 130,(cid:22)3(cid:21) (cid:23),0(cid:21)5 34,154 (34,(cid:21)20) 12,394 (cid:23),(cid:22)40 (10,112) (55,405) (240,(cid:23)(cid:21)5) 2,121 (202,29(cid:23)) (53,4(cid:23)(cid:23)) (25(cid:22),229) 49,939 (11,920) (49,1(cid:21)9) 9(cid:21),443 132,3(cid:23)2 (31,003) (32(cid:21),(cid:23)09) (41(cid:21),(cid:21)35) (901,924) ((cid:21)(cid:21)(cid:23),(cid:22)1(cid:22)) ((cid:22)39,(cid:23)3(cid:23)) (1,1(cid:22)(cid:22),33(cid:21)) (1,3(cid:21)9,03(cid:21)) 1,192,(cid:23)32 1,4(cid:23)(cid:21),(cid:21)31 (cid:86) (cid:86) (cid:86) (cid:86) (5,500) (131,22(cid:22)) (2,(cid:23)(cid:22)(cid:21)) (3(cid:21)2,29(cid:23)) (30,099) 120,132 (1(cid:21),0(cid:23)9) 999 (cid:22)4,943 (2,959) (225,344) 15(cid:21),(cid:21)(cid:22)9 (13,11(cid:23)) ((cid:23)04) ((cid:23)2,5(cid:23)(cid:22)) 3,(cid:22)(cid:22)(cid:23) (1(cid:22)2,91(cid:21)) 1,44(cid:21),510 1,135,9(cid:23)4 24(cid:22),595 4(cid:23),(cid:22)29 ((cid:21),14(cid:23)) ((cid:21)(cid:23)2,(cid:22)14) (1(cid:23),93(cid:22)) 290,925 (11,1(cid:22)5) (5,5(cid:23)5) 255,22(cid:23) (13,55(cid:23)) (11(cid:21),113) 1,5(cid:21)2,(cid:21)23 ((cid:22)(cid:21)(cid:22),(cid:23)53) 2,330,4(cid:22)(cid:21) Cash, cash equivalents and restricted cash, end of the period . . . . . . . . . . . . . . . . . . . . . . (cid:4) 1,2(cid:22)3,594 (cid:4) 1,44(cid:21),510 (cid:4) 1,5(cid:21)2,(cid:21)23 Su(cid:63)(cid:63)le(cid:60)ental (cid:51)i(cid:66)(cid:50)l(cid:62)(cid:66)ure (cid:62)(cid:53) n(cid:62)n(cid:50)a(cid:66)(cid:55) in(cid:69)e(cid:66)ting an(cid:51) (cid:53)inan(cid:50)ing a(cid:50)ti(cid:69)itie(cid:66)(cid:21) Property, plant and equipment acquisitions funded by liabilities . . . . . . . . . . . . . . . . . Sale of system previously accounted for as sale(cid:12)leaseback financing . . . . . . . . . . . . . Accrued interest capitalized to long(cid:12)term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) (cid:4) 110,5(cid:22)(cid:21) (cid:4) (cid:22)(cid:21),14(cid:23) (cid:4) 13(cid:23),2(cid:22)0 (cid:86) (cid:4) (cid:86) (cid:4) (cid:86) (cid:4) (cid:86) (cid:4) 31,992 3,512 See accompanying notes to these consolidated financial statements. (cid:23)(cid:22) FIRST SOLAR, INC. AND SU(cid:24)SIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATE(cid:35)ENTS (cid:12). Fir(cid:66)t S(cid:62)lar an(cid:51) It(cid:66) (cid:24)u(cid:66)ine(cid:66)(cid:66) We are a leading global provider of P(cid:48) solar energy solutions. We design, manufacture, and sell P(cid:48) solar modules with an advanced thin film semiconductor technology. In certain markets, we also develop and sell P(cid:48) solar power systems that primarily use the modules we manufacture and provide O(cid:6)M services to system owners. We have substantial, ongoing R(cid:6)D efforts focused on various technology innovations. We are the world(cid:89)s largest thin film P(cid:48) solar module manufacturer and the largest P(cid:48) solar module manufacturer in the Western Hemisphere. (cid:13). Su(cid:60)(cid:60)ar(cid:72) (cid:62)(cid:53) Signi(cid:53)i(cid:50)ant A(cid:50)(cid:50)(cid:62)unting (cid:38)(cid:62)li(cid:50)ie(cid:66) (cid:16)asis o(cid:41) Presentation. These consolidated financial statements include the accounts of First Solar, Inc. and its subsidiaries and are prepared in accordance with U.S. GAAP. We eliminated all intercompany transactions and balances during consolidation. Certain prior year balances were reclassified to conform to the current year presentation. (cid:33)se o(cid:41) (cid:19)stimates. The preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and the accompanying notes. On an ongoing basis, we evaluate our estimates, including those related to inputs used to recognize revenue over time, accrued solar module collection and recycling liabilities, product warranties, accounting for income taxes, and long(cid:12)lived asset impairments. Despite our intention to establish accurate estimates and reasonable assumptions, actual results could differ materially from such estimates and assumptions. (cid:20)air (cid:34)a(cid:47)ue (cid:26)easurements. We measure certain assets and liabilities at fair value, which is defined as the price that would be received from the sale of an asset or paid to transfer a liability (i.e., an exit price) on the measurement date in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability. Our fair value measurements use the following hierarchy, which prioritizes valuation inputs based on the extent to which the inputs are observable in the market. (cid:82) (cid:82) (cid:82) Level 1 (cid:85) (cid:48)aluation techniques in which all significant inputs are unad(cid:61)usted quoted prices from active markets for assets or liabilities that are identical to the assets or liabilities being measured. Level 2 (cid:85) (cid:48)aluation techniques in which significant inputs include quoted prices from active markets for assets or liabilities that are similar to the assets or liabilities being measured and/or quoted prices for assets or liabilities that are identical or similar to the assets or liabilities being measured from markets that are not active. Also, model(cid:12)derived valuations in which all significant inputs are observable in active markets are Level 2 valuation techniques. Level 3 (cid:85) (cid:48)aluation techniques in which one or more significant inputs are unobservable. Such inputs reflect our estimate of assumptions that market participants would use to price an asset or liability. Cash and Cash (cid:19)(cid:52)ui(cid:57)a(cid:47)ents. We consider highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents with the exception of time deposits, which are presented as marketable securities. (cid:23)(cid:23) Restricted Cash. Restricted cash consists of cash and cash equivalents held by various banks to secure certain of our letters of credit and other such deposits designated for the construction or operation of systems pro(cid:61)ects as well as the payment of amounts related to pro(cid:61)ect specific debt financings. Restricted cash also includes cash and cash equivalents held in custodial accounts to fund the estimated future costs of our solar module collection and recycling obligations. Restricted cash for our letters of credit is classified as current or noncurrent based on the maturity date of the corresponding letter of credit. Restricted cash for pro(cid:61)ect construction, operation, and financing is classified as current or noncurrent based on the intended use of the restricted funds. Restricted cash held in custodial accounts is classified as noncurrent to align with the nature of the corresponding collection and recycling liabilities. (cid:26)arketa(cid:37)(cid:47)e (cid:31)ecurities and Restricted (cid:26)arketa(cid:37)(cid:47)e (cid:31)ecurities. We determine the classification of our marketable securities and restricted marketable securities at the time of purchase and reevaluate such designation at each balance sheet date. As of December 31, 2020 and 2019, all of our marketable securities and restricted marketable securities were classified as available(cid:12)for(cid:12)sale debt securities. Accordingly, we record them at fair value and account for the net unrealized gains and losses as part of (cid:87)Accumulated other comprehensive loss(cid:88) until realized. We record realized gains and losses on the sale of our marketable securities and restricted marketable securities in (cid:87)Other (expense) income, net(cid:88) computed using the specific identification method. We may sell marketable securities prior to their stated maturities after consideration of our liquidity requirements. We view unrestricted securities with maturities beyond 12 months as available to support our current operations and, accordingly, classify such securities as current assets under (cid:87)Marketable securities(cid:88) in the consolidated balance sheets. Restricted marketable securities consist of long(cid:12)term duration marketable securities that we hold in custodial accounts to fund the estimated future costs of our solar module collection and recycling obligations. Accordingly, we classify restricted marketable securities as noncurrent assets under (cid:87)Restricted marketable securities(cid:88) in the consolidated balance sheets. (cid:15)ccounts Recei(cid:57)a(cid:37)(cid:47)e (cid:32)rade. We record trade accounts receivable for our unconditional rights to consideration arising from our performance under contracts with customers. The carrying value of such receivables, net of the allowance for credit losses, represents their estimated net realizable value. Our module and other equipment sales generally include up to 45(cid:12)day payment terms following the transfer of control of the products to the customer. In addition, certain module and equipment sale agreements may require a down payment for a portion of the transaction price upon or shortly after entering into the agreement or related purchase order. Payment terms for sales of our solar power systems, EPC services, and operations and maintenance services vary by contract but are generally due upon demand or within several months of satisfying the associated performance obligations. As a practical expedient, we do not ad(cid:61)ust the promised amount of consideration for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised product or service to a customer and when the customer pays for that product or service will be one year or less. We typically do not include extended payment terms in our contracts with customers. (cid:15)ccounts Recei(cid:57)a(cid:37)(cid:47)e(cid:5) (cid:33)n(cid:37)i(cid:47)(cid:47)ed. Accounts receivable, unbilled represents a contract asset for revenue that has been recognized in advance of billing the customer, which is common for long(cid:12)term construction contracts. For example, we typically recognize revenue from contracts for the construction and sale of P(cid:48) solar power systems over time using cost based input methods, which recognize revenue and gross profit as work is performed based on the relationship between actual costs incurred compared to the total estimated costs of the contract. Accordingly, revenue could be recognized in advance of billing the customer, resulting in an amount recorded to (cid:87)Accounts receivable, unbilled and retainage(cid:88) or (cid:87)Other assets(cid:88) depending on the expected timing of payment for such unbilled receivables. Once we have an unconditional right to consideration under a construction contract, we typically bill our customer and reclassify the (cid:87)Accounts receivable, unbilled and retainage(cid:88) to (cid:87)Accounts receivable trade.(cid:88) Billing requirements vary by contract but are generally structured around the completion of certain development, construction, or other specified milestones. (cid:23)9 Retainage. Certain of our EPC contracts for P(cid:48) solar power systems we build contain retainage provisions. Retainage represents a contract asset for the portion of the contract price earned by us for work performed, but held for payment by the customer as a form of security until we reach certain construction milestones. We consider whether collectibility of such retainage is reasonably assured in connection with our overall assessment of the collectibility of amounts due or that will become due under our EPC contracts. Retainage included within (cid:87)Accounts receivable, unbilled and retainage(cid:88) is expected to be billed and collected within the next 12 months. After we satisfy the EPC contract requirements and have an unconditional right to consideration, we typically bill our customer for retainage and reclassify such amount to (cid:87)Accounts receivable trade.(cid:88) (cid:15)(cid:47)(cid:47)o(cid:58)ance (cid:41)or Credit (cid:25)osses. The allowance for credit losses is a valuation account that is deducted from a financial asset(cid:89)s amortized cost to present the net amount we expect to collect from such asset. We estimate allowances for credit losses using relevant available information from both internal and external sources. We monitor the estimated credit losses associated with our trade accounts receivable and unbilled accounts receivable based primarily on our collection history and the delinquency status of amounts owed to us, which we determine based on the aging of such receivables. For our notes receivable, we determine estimated credit losses through an assessment of the borrower(cid:89)s credit quality based primarily on quarterly reviews of certain financial information, including financial statements and forecasts. We estimate credit losses associated with our marketable securities and restricted marketable securities based on the external credit rating for such investments and the historical loss rates associated with such credit ratings, which we obtain from third parties. Such methods and estimates are ad(cid:61)usted, as appropriate, for relevant past events, current conditions, such as the CO(cid:48)ID(cid:12)19 pandemic and related containment measures, and reasonable and supportable forecasts. We recognize writeoffs within the allowance for credit losses when cash receipts associated with our financial assets are deemed uncollectible. (cid:23)n(cid:57)entories (cid:63) Current and (cid:27)oncurrent. We report our inventories at the lower of cost or net realizable value. We determine cost on a first(cid:12)in, first(cid:12)out basis and include both the costs of acquisition and manufacturing in our inventory costs. These costs include direct materials, direct labor, and indirect manufacturing costs, including depreciation and amortization. Our capitalization of indirect costs is based on the normal utilization of our plants. If our plant utilization is abnormally low, the portion of our indirect manufacturing costs related to the abnormal utilization level is expensed as incurred. Other abnormal manufacturing costs, such as wasted materials or excess yield losses, are also expensed as incurred. Finished goods inventory is comprised exclusively of solar modules that have not yet been installed in a P(cid:48) solar power plant under construction or sold to a third(cid:12)party customer. As needed, we may purchase a critical raw material that is used in our core production process in quantities that exceed anticipated consumption within our normal operating cycle, which is 12 months. We classify such raw materials that we do not expect to consume within our normal operating cycle as noncurrent. We regularly review the cost of inventories, including noncurrent inventories, against their estimated net realizable value and record write(cid:12)downs if any inventories have costs in excess of their net realizable values. We also regularly evaluate the quantities and values of our inventories, including noncurrent inventories, in light of current market conditions and trends, among other factors, and record write(cid:12)downs for any quantities in excess of demand or for any obsolescence. This evaluation considers the use of modules in our systems business or product warranties, module selling prices, product obsolescence, strategic raw material requirements, and other factors. (cid:16)a(cid:47)ance o(cid:41) (cid:31)(cid:60)stems Parts. BoS parts represent mounting, electrical, and other parts purchased for the construction and maintenance of P(cid:48) solar power systems. These parts, which are not yet installed in a system, may include posts, tilt brackets, tables, harnesses, combiner boxes, inverters, cables, tracker equipment, and other items that we may purchase or assemble for the systems we construct. We carry BoS parts at the lower of cost or net realizable value and determine their costs on a weighted(cid:12)average basis. BoS parts do not include any solar modules that we manufacture. 90 Propert(cid:60)(cid:5) P(cid:47)ant and (cid:19)(cid:52)uipment. We report our property, plant and equipment at cost, less accumulated depreciation. Cost includes the price paid to acquire or construct the assets, required installation costs, interest capitalized during the construction period, and any expenditures that substantially add to the value of or substantially extend the useful life of the assets. We capitalize costs related to computer software obtained or developed for internal use, which generally includes enterprise(cid:12)level business and finance software that we customize to meet our specific operational requirements. We expense repair and maintenance costs at the time we incur them. We begin depreciation for our property, plant and equipment when the assets are placed in service. We consider such assets to be placed in service when they are both in the location and condition for their intended use. We compute depreciation expense using the straight(cid:12)line method over the estimated useful lives of assets, as presented in the table below. We depreciate leasehold improvements over the shorter of their estimated useful lives or the remaining term of the lease. The estimated useful life of an asset is reassessed whenever applicable facts and circumstances indicate a change in the estimated useful life of such asset has occurred. Buildings and building improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Manufacturing machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Furniture, fixtures, computer hardware, and computer software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U(cid:66)e(cid:53)ul Li(cid:69)e(cid:66) in (cid:47)ear(cid:66) 25 (cid:85) 40 5 (cid:85) 15 3 (cid:85) (cid:22) up to 15 P(cid:34) (cid:31)o(cid:47)ar Po(cid:58)er (cid:31)(cid:60)stems. P(cid:48) solar power systems represent pro(cid:61)ect assets that we may temporarily own and operate after being placed in service. We report our P(cid:48) solar power systems at cost, less accumulated depreciation. When we are entitled to incentive tax credits for our systems, we reduce the related carrying value of the assets by the amount of the tax credits, which reduces future depreciation. We begin depreciation for P(cid:48) solar power systems when they are placed in service. We compute depreciation expense for the systems using the straight(cid:12)line method over the shorter of the term of the related PPA or 25 years. Accordingly, our current P(cid:48) solar power systems have estimated useful lives ranging from 19 to 25 years. Pro(cid:45)ect (cid:15)ssets. Pro(cid:61)ect assets primarily consist of costs related to solar power pro(cid:61)ects in various stages of development that are capitalized prior to the completion of the sale of the pro(cid:61)ect, including pro(cid:61)ects that may have begun commercial operation under PPAs and are actively marketed and intended to be sold. These pro(cid:61)ect related costs include costs for land, development, and construction of a P(cid:48) solar power system. Development costs may include legal, consulting, permitting, transmission upgrade, interconnection, and other similar costs. We typically classify pro(cid:61)ect assets as noncurrent due to the nature of solar power pro(cid:61)ects (as long(cid:12)lived assets) and the time required to complete all activities to develop, construct, and sell pro(cid:61)ects, which is typically longer than 12 months. Once we enter into a definitive sales agreement, we classify pro(cid:61)ect assets as current until the sale is completed and we have recognized the sale as revenue. Any income generated by a pro(cid:61)ect while it remains within pro(cid:61)ect assets is accounted for as a reduction to our basis in the pro(cid:61)ect. If a pro(cid:61)ect is completed and begins commercial operation prior to the closing of a sales arrangement, the completed pro(cid:61)ect will remain in pro(cid:61)ect assets until placed in service. We present all expenditures related to the development and construction of pro(cid:61)ect assets, whether fully or partially owned, as a component of cash flows from operating activities. We review pro(cid:61)ect assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. We consider a pro(cid:61)ect commercially viable or recoverable if it is anticipated to be sold for a profit once it is either fully developed or fully constructed. We consider a partially developed or partially constructed pro(cid:61)ect commercially viable or recoverable if the anticipated selling price is higher than the carrying value of the related pro(cid:61)ect assets. We examine a number of factors to determine if the pro(cid:61)ect is expected to be recoverable, including whether there are any changes in environmental, permitting, market pricing, regulatory, or other conditions that may impact the pro(cid:61)ect. Such changes could cause the costs of the pro(cid:61)ect to increase or the selling price of the pro(cid:61)ect to decrease. If a pro(cid:61)ect is not considered recoverable, we impair the respective pro(cid:61)ect 91 assets and ad(cid:61)ust the carrying value to the estimated fair value, with the resulting impairment recorded within (cid:87)Selling, general and administrative(cid:88) expense. (cid:23)nterest Capita(cid:47)i(cid:61)ation. We capitalize interest as part of the historical cost of acquiring, developing, or constructing certain assets, including property, plant and equipment(cid:26) pro(cid:61)ect assets(cid:26) and P(cid:48) solar power systems. Interest capitalized for property, plant and equipment or P(cid:48) solar power systems is depreciated over the estimated useful life of the related assets when they are placed in service. We charge interest capitalized for pro(cid:61)ect assets to cost of sales when such assets are sold. We capitalize interest to the extent that interest has been incurred and payments have been made to acquire, construct, or develop an asset. We cease capitalization of interest for assets in development or under construction if the assets are substantially complete or if we have sold such assets. (cid:15)sset (cid:23)mpairments. We assess long(cid:12)lived assets classified as (cid:87)held and used,(cid:88) including our property, plant and equipment(cid:26) P(cid:48) solar power systems(cid:26) pro(cid:61)ect assets(cid:26) operating lease assets(cid:26) and intangible assets, for impairment whenever events or changes in circumstances arise, including consideration of technological obsolescence, that may indicate that the carrying amount of such assets may not be recoverable. These events and changes in circumstances may include a significant decrease in the market price of a long(cid:12)lived asset(cid:26) a significant adverse change in the extent or manner in which a long(cid:12)lived asset is being used or in its physical condition(cid:26) a significant adverse change in the business climate that could affect the value of a long(cid:12)lived asset(cid:26) an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long(cid:12)lived asset(cid:26) a current(cid:12)period operating or cash flow loss combined with a history of such losses or a pro(cid:61)ection of future losses associated with the use of a long(cid:12)lived asset(cid:26) or a current expectation that, more likely than not, a long(cid:12)lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. For purposes of recognition and measurement of an impairment loss, long(cid:12)lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. When impairment indicators are present, we compare undiscounted future cash flows, including the eventual disposition of the asset group at market value, to the asset group(cid:89)s carrying value to determine if the asset group is recoverable. If the carrying value of the asset group exceeds the undiscounted future cash flows, we measure any impairment by comparing the fair value of the asset group to its carrying value. Fair value is generally determined by considering (i) internally developed discounted cash flows for the asset group, (ii) third(cid:12)party valuations, and/or (iii) information available regarding the current market value for such assets. If the fair value of an asset group is determined to be less than its carrying value, an impairment in the amount of the difference is recorded in the period that the impairment indicator occurs. Estimating future cash flows requires significant (cid:61)udgment, and such pro(cid:61)ections may vary from the cash flows eventually realized. We consider a long(cid:12)lived asset to be abandoned after we have ceased use of the asset and we have no intent to use or repurpose it in the future. Abandoned long(cid:12)lived assets are recorded at their salvage value, if any. We classify long(cid:12)lived assets or asset groups we plan to sell, excluding pro(cid:61)ect assets and P(cid:48) solar power systems to be sold as part of our ongoing operations, as held for sale on our consolidated balance sheets only after certain criteria have been met including: (i) management has the authority and commits to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and the plan to sell the asset have been initiated, (iv) the sale of the asset is probable within 12 months, (v) the asset is being actively marketed at a reasonable sales price relative to its current fair value, and (vi) it is unlikely that the plan to sell will be withdrawn or that significant changes to the plan will be made. We record assets or asset groups held for sale at the lower of their carrying value or fair value less costs to sell. If, due to unanticipated circumstances, such assets or asset groups are not sold in the 12 months after being classified as held for sale, then held for sale classification would continue as long as the above criteria are still met. (cid:34)entures and (cid:34)aria(cid:37)(cid:47)e (cid:23)nterest (cid:19)ntities. In the normal course of business, we establish wholly owned pro(cid:61)ect companies which may be considered variable interest entities ((cid:87)(cid:48)IEs(cid:88)). We consolidate wholly owned (cid:48)IEs when we are considered the primary beneficiary of such entities. Additionally, we have, and may in the future form, (cid:61)oint 92 venture type arrangements, including partnerships and partially owned limited liability companies or similar legal structures, with one or more third parties primarily to develop, construct, own, and/or sell solar power pro(cid:61)ects. We analyze all of our ventures and classify them into two groups: (i) ventures that must be consolidated because they are either not (cid:48)IEs and we hold a ma(cid:61)ority voting interest, or because they are (cid:48)IEs and we are the primary beneficiary and (ii) ventures that do not need to be consolidated because they are either not (cid:48)IEs and we hold a minority voting interest, or because they are (cid:48)IEs and we are not the primary beneficiary. (cid:48)entures are considered (cid:48)IEs if (i) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support(cid:26) (ii) as a group, the holders of the equity investment at risk lack the ability to make certain decisions, the obligation to absorb expected losses, or the right to receive expected residual returns(cid:26) or (iii) an equity investor has voting rights that are disproportionate to its economic interest and substantially all of the entity(cid:89)s activities are conducted on behalf of that investor. Our venture agreements typically require us to fund some form of capital for the development and construction of a pro(cid:61)ect, depending upon the opportunity and the market in which our ventures are located. We are considered the primary beneficiary of and are required to consolidate a (cid:48)IE if we have the power to direct the activities that most significantly impact the (cid:48)IE(cid:89)s economic performance and the obligation to absorb losses or the right to receive benefits of the (cid:48)IE that could potentially be significant to the entity. If we determine that we do not have the power to direct the activities that most significantly impact the entity, then we are not the primary beneficiary of the (cid:48)IE. (cid:19)(cid:52)uit(cid:60) (cid:26)ethod (cid:23)n(cid:57)estments. We use the equity method of accounting for our investments when we have the ability to significantly influence, but not control, the operations or financial activities of the investee. As part of this evaluation, we consider our participating and protective rights in the venture as well as its legal form. We record our equity method investments at cost and subsequently ad(cid:61)ust their carrying amount each period for our share of the earnings or losses of the investee and other ad(cid:61)ustments required by the equity method of accounting. We present our equity method investments within (cid:87)Other assets.(cid:88) Distributions received from our equity method investments are recorded as reductions in the carrying value of such investments and are classified on the consolidated statements of cash flows pursuant to the cumulative earnings approach. Under this approach, distributions received are considered returns on investment and are classified as cash inflows from operating activities unless our cumulative distributions received, less distributions received in prior periods that were determined to be returns of investment, exceed our cumulative equity in earnings recognized from the investment. When such an excess occurs, the current period distributions up to this excess are considered returns of investment and are classified as cash inflows from investing activities. We monitor equity method investments for impairment and record reductions in their carrying values if the carrying amount of an investment exceeds its fair value. An impairment charge is recorded when such impairment is deemed to be other(cid:12)than(cid:12)temporary. To determine whether an impairment is other(cid:12)than(cid:12)temporary, we consider our ability and intent to hold the investment until the carrying amount is fully recovered. Circumstances that indicate an other(cid:12) than(cid:12)temporary impairment may have occurred include factors such as decreases in quoted market prices or declines in the operations of the investee. The evaluation of an investment for potential impairment requires us to exercise significant (cid:61)udgment and to make certain assumptions. The use of different (cid:61)udgments and assumptions could result in different conclusions. Good(cid:58)i(cid:47)(cid:47). Goodwill represents the excess of the purchase price of acquired businesses over the estimated fair value assigned to the individual assets acquired and liabilities assumed. We do not amortize goodwill, but instead are required to test goodwill for impairment at least annually. We perform impairment tests between the scheduled annual test in the fourth quarter if facts and circumstances indicate that it is more likely than not that the fair value of a reporting unit that has goodwill is less than its carrying value. 93 We may first make a qualitative assessment of whether it is more likely than not that a reporting unit(cid:89)s fair value is less than its carrying value to determine whether it is necessary to perform a quantitative goodwill impairment test. Such qualitative impairment test considers various factors, including macroeconomic conditions, industry and market considerations, cost factors, the overall financial performance of a reporting unit, and any other relevant events affecting our company or a reporting unit. If we determine through the qualitative assessment that a reporting unit(cid:89)s fair value is more likely than not greater than its carrying value, the quantitative impairment test is not required. If the qualitative assessment indicates it is more likely than not that a reporting unit(cid:89)s fair value is less than its carrying value, we perform a quantitative impairment test. We may also elect to proceed directly to the quantitative impairment test without considering qualitative factors. The quantitative impairment test is the comparison of the fair value of a reporting unit with its carrying amount, including goodwill. Our reporting units consist of our modules and systems businesses. We define the fair value of a reporting unit as the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date. We primarily use an income approach to estimate the fair value of our reporting units. Significant (cid:61)udgment is required when estimating the fair value of a reporting unit, including the forecasting of future operating results and the selection of discount and expected future growth rates used to determine pro(cid:61)ected cash flows. If the estimated fair value of a reporting unit exceeds its carrying value, goodwill is not impaired, and no further analysis is required. Conversely, if the carrying value of a reporting unit exceeds its estimated fair value, we record an impairment loss equal to the excess, not to exceed the total amount of goodwill allocated to the reporting unit. (cid:23)ntangi(cid:37)(cid:47)e (cid:15)ssets. Intangible assets primarily include developed technologies, certain PPAs acquired after the associated P(cid:48) solar power systems were placed in service, and our internally(cid:12)generated intangible assets, substantially all of which were patents on technologies related to our products and production processes. We record an asset for patents after the patent has been issued based on the legal, filing, and other costs incurred to secure it. We amortize intangible assets on a straight(cid:12)line basis over their estimated useful lives, which generally range from 10 to 20 years. (cid:25)eases. Upon commencement of a lease, we recognize a lease liability for the present value of the lease payments not yet paid, discounted using an interest rate that represents our ability to borrow on a collateralized basis over a period that approximates the lease term. We also recognize a lease asset, which represents our right to control the use of the underlying property, plant or equipment, at an amount equal to the lease liability, ad(cid:61)usted for prepayments and initial direct costs. We subsequently recognize the cost of operating leases on a straight(cid:12)line basis over the lease term, and any variable lease costs, which represent amounts owed to the lessor that are not fixed per the terms of the contract, are recognized in the period in which they are incurred. Any costs included in our lease arrangements that are not directly related to the leased assets, such as maintenance charges, are included as part of the lease costs. Leases with an initial term of one year or less are considered short(cid:12)term leases and are not recognized as lease assets and liabilities. We also recognize the cost of such short(cid:12)term leases on a straight(cid:12)line basis over the term of the underlying agreement. Many of our leases, in particular those related to systems pro(cid:61)ect land, contain renewal or termination options that are exercisable at our discretion. At the commencement date of a lease, we include in the lease term any periods covered by a renewal option, and exclude from the lease term any periods covered by a termination option, to the extent we are reasonably certain to exercise such options. In making this determination, we seek to align the lease term with the expected economic life of the underlying asset. (cid:18)e(cid:41)erred Re(cid:57)enue. When we receive consideration, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a sales contract, we record deferred revenue, which represents a contract liability. Such deferred revenue typically results from billings in excess of costs incurred on long(cid:12)term construction contracts and advance payments received on sales of solar modules. As a 94 practical expedient, we do not ad(cid:61)ust the consideration in a contract for the effects of a significant financing component when we expect, at contract inception, that the period between a customer(cid:89)s advance payment and our transfer of a promised product or service to the customer will be one year or less. Additionally, we do not ad(cid:61)ust the consideration in a contract for the effects of a significant financing component when the consideration is received as a form of performance security. Product (cid:35)arranties. We provide a limited P(cid:48) solar module warranty covering defects in materials and workmanship under normal use and service conditions for up to 12 years. We also typically warrant that modules installed in accordance with agreed(cid:12)upon specifications will produce at least 9(cid:23)(cid:5) of their labeled power output rating during the first year, with the warranty coverage reducing by a degradation factor every year thereafter throughout the limited power output warranty period of up to 30 years. Among other things, our solar module warranty also covers the resulting power output loss from cell cracking. In resolving claims under both the limited defect and power output warranties, we typically have the option of either repairing or replacing the covered modules or, under the limited power output warranty, providing additional modules to remedy the power shortfall. Our limited module warranties also include an option for us to remedy claims under such warranties, generally exercisable only after the second year of the warranty period, by making certain cash payments. Under the limited workmanship warranty, the optional cash payment will be equal to the original purchase price of the module, reduced by a degradation factor, and under the limited power output warranty, the cash payment will be equal to the shortfall in power output. Such limited module warranties are standard for module sales and may be transferred from the original purchasers of the solar modules to subsequent purchasers upon resale. As an alternative form of our standard limited module power output warranty, we have also offered an aggregated or system(cid:12)level limited module performance warranty. This system(cid:12)level limited module performance warranty is designed for utility(cid:12)scale systems and provides 25(cid:12)year system(cid:12)level energy degradation protection. This warranty represents a practical expedient to address the challenge of identifying, from the potential millions of modules installed in a utility(cid:12)scale system, individual modules that may be performing below warranty thresholds by focusing on the aggregate energy generated by the system rather than the power output of individual modules. The system(cid:12) level limited module performance warranty is typically calculated as a percentage of a system(cid:89)s expected energy production, ad(cid:61)usted for certain actual site conditions, with the warranted level of performance declining each year in a linear fashion, but never falling below (cid:23)0(cid:5) during the term of the warranty. In resolving claims under the system(cid:12)level limited module performance warranty to restore the system to warranted performance levels, we first must validate that the root cause of the issue is due to module performance(cid:26) we then have the option of either repairing or replacing the covered modules, providing supplemental modules, or making a cash payment. Consistent with our limited module power output warranty, when we elect to satisfy a warranty claim by providing replacement or supplemental modules under the system(cid:12)level module performance warranty, we do not have any obligation to pay for the labor to remove or install modules. In addition to our limited solar module warranties described above, for P(cid:48) solar power systems we construct, we typically provide limited warranties for defects in engineering design, installation, and BoS part workmanship for a period of one to two years following the substantial completion of a system or a block within the system. In resolving claims under such BoS warranties, we have the option of remedying the defect through repair or replacement. When we recognize revenue for module or system sales, we accrue liabilities for the estimated future costs of meeting our limited warranty obligations. We make and revise these estimates based primarily on the number of solar modules under warranty installed at customer locations, our historical experience with and pro(cid:61)ections of warranty claims, and our estimated per(cid:12)module replacement costs. We also monitor our expected future module performance through certain quality and reliability testing and actual performance in certain field installation sites. (cid:15)ccrued (cid:31)o(cid:47)ar (cid:26)odu(cid:47)e Co(cid:47)(cid:47)ection and Rec(cid:60)c(cid:47)ing (cid:25)ia(cid:37)i(cid:47)it(cid:60). Historically, we recognized expense at the time of sale for the estimated cost of our future obligations for collecting and recycling solar modules covered by our solar module 95 collection and recycling program. See Note 11. (cid:87)Solar Module Collection and Recycling Liability(cid:88) to our consolidated financial statements for further information. (cid:18)eri(cid:57)ati(cid:57)e (cid:23)nstruments. We recognize derivative instruments on our consolidated balance sheets at their fair value. On the date that we enter into a derivative contract, we designate the derivative instrument as a fair value hedge, a cash flow hedge, a hedge of a net investment in a foreign operation, or a derivative instrument that will not be accounted for using hedge accounting methods. As of December 31, 2020 and 2019, all of our derivative instruments were designated either as cash flow hedges or as derivative instruments not accounted for using hedge accounting methods. We record changes in the fair value of a derivative instrument that is highly effective and that is designated and qualifies as a cash flow hedge in (cid:87)Accumulated other comprehensive loss(cid:88) until our earnings are affected by the variability of the cash flows from the underlying hedged item. We record any amounts excluded from effectiveness testing in current period earnings in the same income statement line item in which the earnings effect of the hedged item is reported. We report changes in the fair value of derivative instruments that are not designated or do not qualify for hedge accounting in current period earnings. We classify cash flows from derivative instruments on the consolidated statements of cash flows in the same category as the item being hedged or on a basis consistent with the nature of the instrument. At the inception of a hedge, we formally document all relationships between hedging instruments and the underlying hedged items as well as our risk(cid:12)management ob(cid:61)ective and strategy for undertaking the hedge transaction. We also formally assess (both at inception and on an ongoing basis) whether our derivative instruments are highly effective in offsetting changes in the fair value or cash flows of the underlying hedged items and whether those derivatives are expected to remain highly effective in future periods. When we determine that a derivative instrument is not highly effective as a hedge, we discontinue hedge accounting prospectively. In all situations in which we discontinue hedge accounting and the derivative instrument remains outstanding, we carry the derivative instrument at its fair value on our consolidated balance sheets and recognize subsequent changes in its fair value in current period earnings. (cid:15)ccumu(cid:47)ated (cid:28)ther Comprehensi(cid:57)e (cid:23)ncome or (cid:25)oss. Our accumulated other comprehensive income or loss includes foreign currency translation ad(cid:61)ustments, unrealized gains and losses on available(cid:12)for(cid:12)sale debt securities, and unrealized gains and losses on derivative instruments designated and qualifying as cash flow hedges. We record these components of accumulated other comprehensive income or loss net of tax and release such tax effects when the underlying components affect earnings. Re(cid:57)enue Recognition (cid:63) (cid:26)odu(cid:47)e (cid:31)a(cid:47)es. We recognize revenue for module sales at a point in time following the transfer of control of such products to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. Re(cid:57)enue Recognition (cid:63) (cid:31)o(cid:47)ar Po(cid:58)er (cid:31)(cid:60)stem (cid:31)a(cid:47)es and(cid:8)or (cid:19)PC (cid:31)er(cid:57)ices. We recognize revenue for the sale of a development pro(cid:61)ect, which excludes EPC services, or for the sale of a completed system when we enter into the associated sales contract with the customer. For EPC services, or sales of solar power systems with EPC services, we recognize revenue over time as our performance creates or enhances an energy generation asset controlled by the customer. Furthermore, the sale of a solar power system combined with EPC services represents a single performance obligation for the development and construction of a single generation asset. For such arrangements, we recognize revenue and gross profit as work is performed using cost based input methods, for which we determine our progress toward contract completion based on the relationship between the actual costs incurred and the total estimated costs (including solar module costs) of the contract. Such revenue recognition is dependent, in part, on our customers(cid:89) commitment to perform their obligations under the contract, which is typically measured through the receipt of cash deposits or other forms of financial security issued by creditworthy financial institutions or parent entities. 9(cid:21) Cost based input methods of revenue recognition are considered a faithful depiction of our efforts to satisfy long(cid:12) term construction contracts and therefore reflect the transfer of goods to a customer under such contracts. Costs incurred that do not contribute to satisfying our performance obligations (i.e., (cid:87)inefficient costs(cid:88)) are excluded from our input methods of revenue recognition as the amounts are not reflective of our transferring control of the system to the customer. Costs incurred toward contract completion may include costs associated with solar modules, direct materials, labor, subcontractors, and other indirect costs related to contract performance. We recognize solar module and direct material costs as incurred when such items are installed in a system. Cost based input methods of revenue recognition require us to make estimates of net contract revenues and costs to complete our pro(cid:61)ects. In making such estimates, significant (cid:61)udgment is required to evaluate assumptions related to the amount of net contract revenues, including the impact of any performance incentives, liquidated damages, and other payments to customers. Significant (cid:61)udgment is also required to evaluate assumptions related to the costs to complete our pro(cid:61)ects, including materials, labor, contingencies, and other system costs. If the estimated total costs on any contract, including any inefficient costs, are greater than the net contract revenues, we recognize the entire estimated loss in the period the loss becomes known. The cumulative effect of revisions to estimates related to net contract revenues or costs to complete contracts are recorded in the period in which the revisions to estimates are identified and the amounts can be reasonably estimated. The effect of the changes on future periods are recognized as if the revised estimates had been used since revenue was initially recognized under the contract. Such revisions could occur in any reporting period, and the effects may be material depending on the size of the contracts or the changes in estimates. As part of our solar power system sales, we conduct performance testing of a system prior to substantial completion to confirm the system meets its operational and capacity expectations noted in the EPC agreement. In addition, we may provide an energy performance test during the first or second year of a system(cid:89)s operation to demonstrate that the actual energy generation for the applicable period meets or exceeds the modeled energy expectation, after certain ad(cid:61)ustments. In certain instances, a bonus payment may be received at the end of the applicable test period if the system performs above a specified level. Conversely, if there is an underperformance event with regards to these tests, we may incur liquidated damages as a percentage of the EPC contract price. Such performance guarantees represent a form of variable consideration and are estimated at contract inception at their most likely amount and updated at the end of each reporting period as additional performance data becomes available and only to the extent that it is probable that a significant reversal of any incremental revenue will not occur. Re(cid:57)enue Recognition (cid:63) (cid:28)perations and (cid:26)aintenance. We recognize revenue for standard, recurring O(cid:6)M services over time as customers receive and consume the benefits of such services, which typically include 24/(cid:22) system monitoring, certain PPA and other agreement compliance, NERC compliance, large generator interconnection agreement compliance, energy forecasting, performance engineering analysis, regular performance reporting, turn(cid:12) key maintenance services including spare parts and corrective maintenance repair, warranty management, and environmental services. Other ancillary O(cid:6)M services, such as equipment replacement, weed abatement, landscaping, or solar module cleaning, are recognized as revenue as the services are provided to the customer. Costs of O(cid:6)M services are expensed in the period in which they are incurred. As part of our O(cid:6)M service offerings, we typically offer an effective availability guarantee, which stipulates that a system will be available to generate a certain percentage of total possible energy during a specific period after ad(cid:61)usting for factors outside our control as the service provider. If system availability exceeds a contractual threshold, we may receive a bonus payment, or if system availability falls below a separate threshold, we may incur liquidated damages for certain lost energy under the PPA. Such bonuses or liquidated damages represent a form of variable consideration and are estimated and recognized over time as customers receive and consume the benefits of the O(cid:6)M services. 9(cid:22) Re(cid:57)enue Recognition (cid:63) (cid:19)nerg(cid:60) Generation. We sell energy generated by P(cid:48) solar power systems under PPAs or on an open contract basis. For energy sold under PPAs, we recognize revenue each period based on the volume of energy delivered to the customer (i.e., the PPA off(cid:12)taker) and the price stated in the PPA. For energy sold on an open contract basis, we recognize revenue at the point in time the energy is delivered to the grid based on the prevailing spot market prices. (cid:31)hipping and (cid:22)and(cid:47)ing Costs. We account for shipping and handling activities related to contracts with customers as costs to fulfill our promise to transfer the associated products. Accordingly, we record amounts billed for shipping and handling costs as a component of net sales, and classify such costs as a component of cost of sales. (cid:32)a(cid:59)es Co(cid:47)(cid:47)ected (cid:41)rom Customers and Remitted to Go(cid:57)ernmenta(cid:47) (cid:15)uthorities. We exclude from our measurement of transaction prices all taxes assessed by governmental authorities that are both (i) imposed on and concurrent with a specific revenue(cid:12)producing transaction and (ii) collected from customers. Accordingly, such tax amounts are not included as a component of net sales or cost of sales. Research and (cid:18)e(cid:57)e(cid:47)opment. We incur research and development costs during the process of researching and developing new products and enhancing our existing products, technologies, and manufacturing processes. Our research and development costs consist primarily of employee compensation, materials, outside services, and depreciation. We expense these costs as incurred until the resulting product has been completed, tested, and made ready for commercial manufacturing. Production (cid:31)tart(cid:6)(cid:33)p. Production start(cid:12)up expense consists primarily of employee compensation and other costs associated with operating a production line before it is qualified for full production, including the cost of raw materials for solar modules run through the production line during the qualification phase and applicable facility related costs. Costs related to equipment upgrades and implementation of manufacturing process improvements are also included in production start(cid:12)up expense as well as costs related to the selection of a new site, related legal and regulatory costs, and costs to maintain our plant replication program to the extent we cannot capitalize these expenditures. (cid:31)hare(cid:6)(cid:16)ased Compensation. We recognize share(cid:12)based compensation expense for the estimated grant(cid:12)date fair value of equity awards issued as compensation to employees over the requisite service period, which is generally four years. For awards with performance conditions, we recognize share(cid:12)based compensation expense if it is probable that the performance conditions will be achieved. We account for forfeitures of share(cid:12)based awards as such forfeitures occur. Accordingly, when an associate(cid:89)s employment is terminated, all previously unvested awards granted to such associate are forfeited, which results in a benefit to share(cid:12)based compensation expense in the period of such associate(cid:89)s termination equal to the cumulative expense recorded through the termination date for the unvested awards. We recognize share(cid:12)based compensation expense for awards with graded vesting schedules on a straight(cid:12)line basis over the requisite service periods for each separately vesting portion of the award as if each award was in substance multiple awards. (cid:20)oreign Currenc(cid:60) (cid:32)rans(cid:47)ation. The functional currencies of certain of our foreign subsidiaries are their local currencies. Accordingly, we apply period(cid:12)end exchange rates to translate their assets and liabilities and daily transaction exchange rates to translate their revenues, expenses, gains, and losses into U.S. dollars. We include the associated translation ad(cid:61)ustments as a separate component of (cid:87)Accumulated other comprehensive loss(cid:88) within stockholders(cid:89) equity. The functional currency of our subsidiaries in Canada, Chile, Malaysia, Singapore, and (cid:48)ietnam is the U.S. dollar(cid:26) therefore, we do not translate their financial statements. Gains and losses arising from the remeasurement of monetary assets and liabilities denominated in currencies other than a subsidiary(cid:89)s functional currency are included in (cid:87)Foreign currency (loss) income, net(cid:88) in the period in which they occur. 9(cid:23) (cid:23)ncome (cid:32)a(cid:59)es. We use the asset and liability method to account for income taxes whereby we calculate deferred tax assets or liabilities using the enacted tax rates and tax law applicable to when any temporary differences are expected to reverse. We establish valuation allowances, when necessary, to reduce deferred tax assets to the extent it is more likely than not that such deferred tax assets will not be realized. We do not provide deferred taxes related to the U.S. GAAP basis in excess of the outside tax basis in the investment in our foreign subsidiaries to the extent such amounts relate to indefinitely reinvested earnings and profits of such foreign subsidiaries. Income tax expense includes (i) deferred tax expense, which generally represents the net change in deferred tax assets or liabilities during the year plus any change in valuation allowances, and (ii) current tax expense, which represents the amount of tax currently payable to or receivable from taxing authorities. We only recognize tax benefits related to uncertain tax positions that are more likely than not of being sustained upon examination. For those positions that satisfy such recognition criteria, the amount of tax benefit that we recognize is the largest amount of tax benefit that is more likely than not of being sustained on ultimate settlement of the uncertain tax position. Per (cid:31)hare (cid:18)ata. Basic net income or loss per share is computed by dividing net income or loss by the weighted(cid:12) average number of common shares outstanding for the period. Diluted net income per share is computed giving effect to all potentially dilutive common shares, including restricted and performance stock units and stock purchase plan shares, unless there is a net loss for the period. In computing diluted net income per share, we utilize the treasury stock method. (cid:14). Re(cid:50)ent A(cid:50)(cid:50)(cid:62)unting (cid:38)r(cid:62)n(cid:62)un(cid:50)e(cid:60)ent(cid:66) In June 201(cid:21), the Financial Accounting Standards Board issued Accounting Standards Update ((cid:87)ASU(cid:88)) 201(cid:21)(cid:12)13, (cid:20)inancia(cid:47) (cid:23)nstruments (cid:63) Credit (cid:25)osses (cid:3)(cid:32)opic (cid:12)(cid:11)(cid:13)(cid:4), to provide financial statement users with more useful information about expected credit losses. ASU 201(cid:21)(cid:12)13 replaces the historical incurred loss model with a model that reflects current expected credit losses ((cid:87)CECL(cid:88)), which requires consideration of a broader range of information to measure credit losses and determine the timing of when such losses are recorded. The CECL model is applicable to certain financial assets measured at amortized cost that sub(cid:61)ect us to credit risk, including cash equivalents, trade accounts receivable, unbilled accounts receivable and retainage, and notes receivable. In addition, ASU 201(cid:21)(cid:12)13 amended certain aspects of the accounting for available(cid:12)for(cid:12)sale debt securities, including the presentation of credit losses as an allowance against, rather than a write(cid:12)down of, the fair value of such securities. Furthermore, a credit loss is only considered when a security is in an unrealized loss position, is limited to the difference between such security(cid:89)s fair value and amortized cost basis, and is recorded directly to (cid:87)Other expense, net.(cid:88) Any remaining unrealized loss is recorded to (cid:87)Accumulated other comprehensive loss(cid:88) until realized. We adopted ASU 201(cid:21)(cid:12)13 in the first quarter of 2020 using the modified(cid:12)retrospective approach, which resulted in the recognition of an initial allowance for credit losses for our various financial assets through a cumulative(cid:12)effect ad(cid:61)ustment that decreased retained earnings by (cid:4)9.2 million, net of tax, as of January 1, 2020. See Note 5. (cid:87)Cash, Cash Equivalents, and Marketable Securities,(cid:88) Note (cid:21). (cid:87)Restricted Marketable Securities,(cid:88) and Note (cid:22). (cid:87)Consolidated Balance Sheet Details(cid:88) to our consolidated financial statements for further information about the allowance for credit losses associated with our various financial assets. 99 (cid:15). G(cid:62)(cid:62)(cid:51)(cid:70)ill an(cid:51) Intangi(cid:49)le A(cid:66)(cid:66)et(cid:66) (cid:19)oo(cid:38)(cid:57)(cid:43)(cid:46)(cid:46) Goodwill for the relevant reporting unit consisted of the following at December 31, 2020 and 2019 (in thousands): Modules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Modules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:12)(cid:20) 40(cid:22),(cid:23)2(cid:22) (cid:4) (393,3(cid:21)5) (cid:4) (cid:4) 14,4(cid:21)2 (cid:4) A(cid:50)(cid:64)ui(cid:66)iti(cid:62)n(cid:66) (cid:4)I(cid:60)(cid:63)air(cid:60)ent(cid:66)(cid:5) De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:13)(cid:11) 40(cid:22),(cid:23)2(cid:22) (393,3(cid:21)5) 14,4(cid:21)2 (cid:86) (cid:4) (cid:86) (cid:86) (cid:4) De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:12)(cid:19) 40(cid:22),(cid:23)2(cid:22) (cid:4) (393,3(cid:21)5) (cid:4) (cid:4) 14,4(cid:21)2 (cid:4) A(cid:50)(cid:64)ui(cid:66)iti(cid:62)n(cid:66) (cid:4)I(cid:60)(cid:63)air(cid:60)ent(cid:66)(cid:5) De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:12)(cid:20) 40(cid:22),(cid:23)2(cid:22) (393,3(cid:21)5) 14,4(cid:21)2 (cid:86) (cid:4) (cid:86) (cid:86) (cid:4) We performed our annual impairment analysis in the fourth quarter of 2020, 2019, and 201(cid:23). ASC 350(cid:12)20 allows companies to perform a qualitative assessment of whether it is more likely than not that a reporting unit(cid:89)s fair value is less than its carrying value to determine whether it is necessary to perform a quantitative goodwill impairment test. Such qualitative assessment considers various factors, including macroeconomic conditions, industry and market considerations, cost factors, the overall financial performance of a reporting unit, and any other relevant events affecting our company or a reporting unit. We performed a qualitative assessment for our modules reporting unit in each respective period and concluded that it was not more likely than not that the fair value of the reporting unit was less than its carrying amount. Accordingly, a quantitative goodwill impairment test for this reporting unit was not required in any period presented. (cid:20)(cid:48)(cid:54)a(cid:48)(cid:41)(cid:43)(cid:36)(cid:46)(cid:39) a(cid:53)(cid:53)(cid:39)(cid:54)(cid:53)(cid:5) (cid:48)(cid:39)(cid:54) The following tables summarize our intangible assets at December 31, 2020 and 2019 (in thousands): Developed technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Power purchase agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Developed technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Power purchase agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:13)(cid:11) A(cid:50)(cid:50)u(cid:60)ulate(cid:51) A(cid:60)(cid:62)rti(cid:73)ati(cid:62)n Net A(cid:60)(cid:62)unt Gr(cid:62)(cid:66)(cid:66) A(cid:60)(cid:62)unt (cid:4) 99,9(cid:21)4 (cid:4) (cid:21),4(cid:23)(cid:21) (cid:23),1(cid:22)3 114,(cid:21)23 (cid:4) (cid:4) (52,115) (cid:4) (1,29(cid:21)) (5,0(cid:22)4) (5(cid:23),4(cid:23)5) (cid:4) 4(cid:22),(cid:23)49 5,190 3,099 5(cid:21),13(cid:23) De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:12)(cid:20) A(cid:50)(cid:50)u(cid:60)ulate(cid:51) A(cid:60)(cid:62)rti(cid:73)ati(cid:62)n Net A(cid:60)(cid:62)unt Gr(cid:62)(cid:66)(cid:66) A(cid:60)(cid:62)unt (cid:4) 9(cid:22),9(cid:21)4 (cid:4) (cid:21),4(cid:23)(cid:21) (cid:22),(cid:22)(cid:23)0 112,230 (cid:4) (cid:4) (42,344) (cid:4) (9(cid:22)2) (4,3(cid:22)1) (4(cid:22),(cid:21)(cid:23)(cid:22)) (cid:4) 55,(cid:21)20 5,514 3,409 (cid:21)4,543 Amortization of intangible assets was (cid:4)10.(cid:23) million, (cid:4)10.2 million, and (cid:4)9.9 million for the years ended December 31, 2020, 2019, and 201(cid:23), respectively. 100 Estimated future amortization expense for our definite(cid:12)lived intangible assets was as follows at December 31, 2020 (in thousands): 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) 10,935 10,911 10,(cid:21)2(cid:21) 10,49(cid:22) 4,02(cid:21) 9,143 5(cid:21),13(cid:23) A(cid:60)(cid:62)rti(cid:73)ati(cid:62)n E(cid:71)(cid:63)en(cid:66)e (cid:16). Ca(cid:66)(cid:55), Ca(cid:66)(cid:55) E(cid:64)ui(cid:69)alent(cid:66), an(cid:51) (cid:35)ar(cid:58)eta(cid:49)le Se(cid:50)uritie(cid:66) Cash, cash equivalents, and marketable securities consisted of the following at December 31, 2020 and 2019 (in thousands): (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) Cash and cash equivalents: Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Marketable securities: (cid:4) 1,22(cid:22),000 (cid:4) 1,345,419 (cid:22),322 1,352,(cid:22)41 2 1,22(cid:22),002 Foreign debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign government obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S. debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total cash, cash equivalents, and marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214,254 (cid:86) 14,543 291,2(cid:21)9 520,0(cid:21)(cid:21) 3(cid:23)(cid:22),(cid:23)20 22,011 (cid:21)(cid:21),134 335,541 (cid:23)11,50(cid:21) (cid:4) 1,(cid:22)4(cid:22),0(cid:21)(cid:23) (cid:4) 2,1(cid:21)4,24(cid:22) The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within our consolidated balance sheets as of December 31, 2020 and 2019 to the total of such amounts as presented in the consolidated statements of cash flows (in thousands): Cash and cash equivalents . . . . . . . . . . . . . . . . . . Cash and cash equivalents Restricted cash (cid:85) current . . . . . . . . . . . . . . . . . . . Prepaid expenses and other current assets Restricted cash (cid:85) noncurrent . . . . . . . . . . . . . . . . Other assets Total cash, cash equivalents, and restricted cash . (cid:4) 1,22(cid:22),002 (cid:4) 1,352,(cid:22)41 13,(cid:21)9(cid:22) (cid:23)0,0(cid:22)2 (cid:4) 1,2(cid:22)3,594 (cid:4) 1,44(cid:21),510 1,(cid:22)45 44,(cid:23)4(cid:22) (cid:24)alan(cid:50)e S(cid:55)eet Line Ite(cid:60) (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) During the year ended December 31, 2020, we sold marketable securities for proceeds of (cid:4)1(cid:23)(cid:23).1 million and realized gains of (cid:4)0.2 million on such sales. During the year ended December 31, 2019, we sold marketable securities for proceeds of (cid:4)52.0 million and realized no gain or loss on such sales. During the year ended December 31, 201(cid:23), we sold marketable securities for proceeds of (cid:4)10.(cid:23) million and realized gains of less than (cid:4)0.1 million on such sales. See Note 10. (cid:87)Fair (cid:48)alue Measurements(cid:88) to our consolidated financial statements for information about the fair value of our marketable securities. 101 The following tables summarize the unrealized gains and losses related to our available(cid:12)for(cid:12)sale marketable securities, by ma(cid:61)or security type, as of December 31, 2020 and 2019 (in thousands): Foreign debt . . . . . . . . . . . . . . . . . . . . . . . . . . U.S. debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time deposits . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . A(cid:60)(cid:62)rti(cid:73)e(cid:51) C(cid:62)(cid:66)t 213,949 (cid:4) (cid:4) 14,521 291,3(cid:22)4 519,(cid:23)44 (cid:4) (cid:4) A(cid:66) (cid:62)(cid:53) De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:13)(cid:11) Unreali(cid:73)e(cid:51) Gain(cid:66) Unreali(cid:73)e(cid:51) L(cid:62)(cid:66)(cid:66)e(cid:66) All(cid:62)(cid:70)an(cid:50)e (cid:53)(cid:62)r Cre(cid:51)it L(cid:62)(cid:66)(cid:66)e(cid:66) Fair (cid:44)alue 3(cid:21)(cid:22) (cid:4) 22 (cid:86) 3(cid:23)9 (cid:4) 4(cid:21) (cid:4) (cid:86) (cid:86) 4(cid:21) (cid:4) 1(cid:21) (cid:4) (cid:86) 105 121 (cid:4) 214,254 14,543 291,2(cid:21)9 520,0(cid:21)(cid:21) Foreign debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign government obligations . . . . . . . . . . . . . . . . . . . . . . . U.S. debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A(cid:60)(cid:62)rti(cid:73)e(cid:51) C(cid:62)(cid:66)t 3(cid:23)(cid:22),(cid:22)(cid:22)5 (cid:4) (cid:4) 21,991 (cid:21)5,9(cid:22)0 335,541 (cid:23)11,2(cid:22)(cid:22) (cid:4) (cid:4) A(cid:66) (cid:62)(cid:53) De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:12)(cid:20) Unreali(cid:73)e(cid:51) Gain(cid:66) Unreali(cid:73)e(cid:51) L(cid:62)(cid:66)(cid:66)e(cid:66) Fair (cid:44)alue 551 (cid:4) 20 1(cid:22)(cid:21) (cid:86) (cid:22)4(cid:22) (cid:4) 50(cid:21) (cid:4) (cid:86) 12 (cid:86) 51(cid:23) (cid:4) 3(cid:23)(cid:22),(cid:23)20 22,011 (cid:21)(cid:21),134 335,541 (cid:23)11,50(cid:21) The following table presents the change in allowance for credit losses related to our available(cid:12)for(cid:12)sale marketable securities for the year ended December 31, 2020 (in thousands): Balance as of December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cumulative(cid:12)effect ad(cid:61)ustment for the adoption of ASU 201(cid:21)(cid:12)13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for credit losses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sales and maturities of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance as of December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) (cid:86) 20(cid:22) 32(cid:21) (412) 121 (cid:35)ar(cid:58)eta(cid:49)le Se(cid:50)uritie(cid:66) The contractual maturities of our marketable securities as of December 31, 2020 were as follows (in thousands): One year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . One year to two years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Two years to three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) Fair (cid:44)alue 40(cid:22),491 109,553 3,022 520,0(cid:21)(cid:21) (cid:17). Re(cid:66)tri(cid:50)te(cid:51) (cid:35)ar(cid:58)eta(cid:49)le Se(cid:50)uritie(cid:66) Restricted marketable securities consisted of the following as of December 31, 2020 and 2019 (in thousands): Foreign government obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S. government obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total restricted marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) (cid:13)(cid:11)(cid:13)(cid:11) 149,(cid:22)00 (cid:4) 115,5(cid:23)0 2(cid:21)5,2(cid:23)0 (cid:4) (cid:13)(cid:11)(cid:12)(cid:20) 12(cid:21),0(cid:21)(cid:21) 9(cid:22),(cid:22)19 223,(cid:22)(cid:23)5 Our restricted marketable securities represent long(cid:12)term marketable securities held in custodial accounts to fund the estimated future cost of collecting and recycling modules covered under our solar module collection and recycling program. As of December 31, 2020 and 2019, such custodial accounts also included noncurrent restricted cash balances of (cid:4)0.(cid:22) million and less than (cid:4)0.1 million, respectively, which were reported within (cid:87)Other assets.(cid:88) As 102 necessary, we fund any incremental amounts for our estimated collection and recycling obligations on an annual basis based on the estimated costs of collecting and recycling covered modules, estimated rates of return on our restricted marketable securities, and an estimated solar module life of 25 years, less amounts already funded in prior years. We have established a trust under which estimated funds are put into custodial accounts with an established and reputable bank, for which First Solar, Inc.(cid:26) First Solar Malaysia Sdn. Bhd.(cid:26) and First Solar Manufacturing GmbH are grantors. Trust funds may be disbursed for qualified module collection and recycling costs (including capital and facility related recycling costs), payments to customers for assuming collection and recycling obligations, and reimbursements of any overfunded amounts. Investments in the trust must meet certain investment quality criteria comparable to highly rated government or agency bonds. During the year ended December 31, 2020, we sold certain restricted marketable securities for proceeds of (cid:4)115.2 million and realized gains of (cid:4)15.1 million on such sales, and repurchased (cid:4)114.5 million of restricted marketable securities as part of our ongoing management of the custodial accounts. During the years ended December 31, 2019 and 201(cid:23), we sold certain restricted marketable securities for proceeds of (cid:4)2(cid:23)1.(cid:21) million and (cid:4)231.1 million, respectively, and realized gains of (cid:4)40.(cid:21) million and (cid:4)55.4 million, respectively, on such sales as part of an effort to align the currencies of the investments with those corresponding collection and recycling liabilities and disburse (cid:4)22.2 million and (cid:4)143.1 million, respectively, of overfunded amounts. See Note 10. (cid:87)Fair (cid:48)alue Measurements(cid:88) to our consolidated financial statements for information about the fair value of our restricted marketable securities. The following tables summarize the unrealized gains and losses related to our restricted marketable securities, by ma(cid:61)or security type, as of December 31, 2020 and 2019 (in thousands): Foreign government obligations . . . . . . . . . . U.S. government obligations . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . A(cid:66) (cid:62)(cid:53) De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:13)(cid:11) A(cid:60)(cid:62)rti(cid:73)e(cid:51) C(cid:62)(cid:66)t 131,9(cid:23)0 (cid:4) 115,(cid:21)4(cid:23) 24(cid:22),(cid:21)2(cid:23) (cid:4) (cid:4) (cid:4) Unreali(cid:73)e(cid:51) Gain(cid:66) Unreali(cid:73)e(cid:51) L(cid:62)(cid:66)(cid:66)e(cid:66) All(cid:62)(cid:70)an(cid:50)e (cid:53)(cid:62)r Cre(cid:51)it L(cid:62)(cid:66)(cid:66)e(cid:66) Fair (cid:44)alue 1(cid:22),(cid:22)20 (cid:4) 133 1(cid:22),(cid:23)53 (cid:4) (cid:86) (cid:4) 1(cid:23)(cid:23) 1(cid:23)(cid:23) (cid:4) (cid:86) (cid:4) 13 13 (cid:4) 149,(cid:22)00 115,5(cid:23)0 2(cid:21)5,2(cid:23)0 Foreign government obligations . . . . . . . . . . . . . . . . . . . . . . . U.S. government obligations . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) A(cid:60)(cid:62)rti(cid:73)e(cid:51) C(cid:62)(cid:66)t 129,499 (cid:4) 99,(cid:22)00 229,199 (cid:4) A(cid:66) (cid:62)(cid:53) De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:12)(cid:20) Unreali(cid:73)e(cid:51) Gain(cid:66) Unreali(cid:73)e(cid:51) L(cid:62)(cid:66)(cid:66)e(cid:66) Fair (cid:44)alue (cid:86) (cid:4) (cid:86) (cid:86) (cid:4) 3,433 (cid:4) 1,9(cid:23)1 5,414 (cid:4) 12(cid:21),0(cid:21)(cid:21) 9(cid:22),(cid:22)19 223,(cid:22)(cid:23)5 The following table represents the change in the allowance for credit losses related to our restricted marketable securities for the year ended December 31, 2020 (in thousands): Balance as of December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cumulative(cid:12)effect ad(cid:61)ustment for the adoption of ASU 201(cid:21)(cid:12)13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for credit losses, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sales of restricted marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance as of December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) (cid:86) 54 (1(cid:21)) (25) 13 As of December 31, 2020, the contractual maturities of our restricted marketable securities were between 9 years and 21 years. Re(cid:66)tri(cid:50)te(cid:51) (cid:35)ar(cid:58)eta(cid:49)le Se(cid:50)uritie(cid:66) 103 (cid:18). C(cid:62)n(cid:66)(cid:62)li(cid:51)ate(cid:51) (cid:24)alan(cid:50)e S(cid:55)eet Detail(cid:66) (cid:13)(cid:37)(cid:37)ou(cid:48)(cid:54)(cid:53) r(cid:39)(cid:37)(cid:39)(cid:43)(cid:56)a(cid:36)(cid:46)(cid:39) (cid:54)ra(cid:38)(cid:39)(cid:5) (cid:48)(cid:39)(cid:54) Accounts receivable trade, net consisted of the following at December 31, 2020 and 2019 (in thousands): Accounts receivable trade, gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable trade, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) (cid:13)(cid:11)(cid:13)(cid:11) 2(cid:21)9,095 (cid:4) (3,009) 2(cid:21)(cid:21),0(cid:23)(cid:21) (cid:4) (cid:13)(cid:11)(cid:12)(cid:20) 4(cid:22)(cid:21),425 (1,3(cid:23)(cid:21)) 4(cid:22)5,039 At December 31, 2020 and 2019, (cid:4)24.4 million and (cid:4)44.9 million, respectively, of our trade accounts receivable were secured by letters of credit, bank guarantees, surety bonds, or other forms of financial security issued by creditworthy financial institutions. (cid:13)(cid:37)(cid:37)ou(cid:48)(cid:54)(cid:53) r(cid:39)(cid:37)(cid:39)(cid:43)(cid:56)a(cid:36)(cid:46)(cid:39)(cid:5) u(cid:48)(cid:36)(cid:43)(cid:46)(cid:46)(cid:39)(cid:38) a(cid:48)(cid:38) r(cid:39)(cid:54)a(cid:43)(cid:48)a(cid:41)(cid:39)(cid:5) (cid:48)(cid:39)(cid:54) Accounts receivable, unbilled and retainage, net consisted of the following at December 31, 2020 and 2019 (in thousands): Accounts receivable, unbilled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retainage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable, unbilled and retainage, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) (cid:13)(cid:11)(cid:13)(cid:11) 2(cid:21),(cid:21)(cid:22)3 (cid:4) (cid:86) (303) 2(cid:21),3(cid:22)0 (cid:4) (cid:13)(cid:11)(cid:12)(cid:20) 1(cid:21)2,05(cid:22) 21,41(cid:21) (cid:86) 1(cid:23)3,4(cid:22)3 (cid:13)(cid:46)(cid:46)o(cid:57)a(cid:48)(cid:37)(cid:39) (cid:40)or (cid:37)r(cid:39)(cid:38)(cid:43)(cid:54) (cid:46)o(cid:53)(cid:53)(cid:39)(cid:53) The following table presents the change in the allowances for credit losses related to our accounts receivable for the year ended December 31, 2020 (in thousands): A(cid:50)(cid:50)(cid:62)unt(cid:66) Re(cid:50)ei(cid:69)a(cid:49)le Tra(cid:51)e A(cid:50)(cid:50)(cid:62)unt(cid:66) Re(cid:50)ei(cid:69)a(cid:49)le, Un(cid:49)ille(cid:51) an(cid:51) Retainage Balance as of December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cumulative(cid:12)effect ad(cid:61)ustment for the adoption of ASU 201(cid:21)(cid:12)13 . . . . . . . . . . . . . . . . . . . . . . Provision for credit losses, net (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Writeoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance as of December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) (1,3(cid:23)(cid:21)) (cid:4) (1(cid:22)1) (2,030) 5(cid:22)(cid:23) (3,009) (cid:4) (cid:86) (459) (19) 1(cid:22)5 (303) (cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86) (1) Includes credit losses for trade accounts receivable and unbilled accounts receivable of (cid:4)2.2 million and (cid:4)0.2 million, respectively, to reflect our estimate of expected credit losses attributable to the current economic conditions resulting from the ongoing CO(cid:48)ID(cid:12)19 pandemic. 104 (cid:20)(cid:48)(cid:56)(cid:39)(cid:48)(cid:54)or(cid:43)(cid:39)(cid:53) Inventories consisted of the following at December 31, 2020 and 2019 (in thousands): Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories (cid:85) current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories (cid:85) noncurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) (cid:4) (cid:4) (cid:13)(cid:11)(cid:13)(cid:11) 292,334 (cid:4) (cid:21)4,(cid:22)09 411,(cid:22)(cid:22)3 (cid:22)(cid:21)(cid:23),(cid:23)1(cid:21) (cid:4) 5(cid:21)(cid:22),5(cid:23)(cid:22) (cid:4) 201,229 (cid:4) (cid:13)(cid:11)(cid:12)(cid:20) 24(cid:23),(cid:22)5(cid:21) 59,924 295,4(cid:22)9 (cid:21)04,159 443,513 1(cid:21)0,(cid:21)4(cid:21) (cid:27)r(cid:39)(cid:50)a(cid:43)(cid:38) (cid:39)(cid:58)(cid:50)(cid:39)(cid:48)(cid:53)(cid:39)(cid:53) a(cid:48)(cid:38) o(cid:54)(cid:42)(cid:39)r (cid:37)urr(cid:39)(cid:48)(cid:54) a(cid:53)(cid:53)(cid:39)(cid:54)(cid:53) Prepaid expenses and other current assets consisted of the following at December 31, 2020 and 2019 (in thousands): Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Derivative instruments (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Indirect tax receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes receivable, net (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:13)(cid:11)(cid:13)(cid:11) 1(cid:21)0,534 (cid:4) (cid:4) (cid:22)1,051 3,315 1,(cid:23)2(cid:22) 1,(cid:22)45 (cid:86) 13,23(cid:22) 251,(cid:22)09 (cid:4) (cid:4) (cid:13)(cid:11)(cid:12)(cid:20) 13(cid:22),92(cid:22) 4(cid:22),(cid:23)11 1,199 29,90(cid:23) 13,(cid:21)9(cid:22) 23,(cid:23)(cid:22)3 22,040 2(cid:22)(cid:21),455 (cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86) (1) See Note (cid:23). (cid:87)Derivative Financial Instruments(cid:88) to our consolidated financial statements for discussion of our derivative instruments. (2) In November 2014 and February 201(cid:21), we entered into a term loan agreement and a convertible loan agreement, respectively, with Clean Energy Collective, LLC ((cid:87)CEC(cid:88)). Our term loan bears interest at 1(cid:21)(cid:5) per annum, and our convertible loan bears interest at 10(cid:5) per annum. In November 201(cid:23), we amended the terms of the loan agreements to (i) extend their maturity to June 2020, (ii) waive the conversion features on our convertible loan, and (iii) increase the frequency of interest payments, sub(cid:61)ect to certain conditions. As of December 31, 2019, the aggregate balance outstanding on the loans was (cid:4)23.9 million. Upon the adoption of ASU 201(cid:21)(cid:12)13, we evaluated the estimated credit losses over the remaining contractual term of the loan agreements based on a discounted cash flow model. As a result of this evaluation, we recorded an allowance for credit losses of (cid:4)10.(cid:23) million as of January 1, 2020. During 2020, we recorded incremental credit losses of (cid:4)13.1 million due to CEC(cid:89)s inability to repay the loans by their contractual maturity date, and wrote off the aggregate outstanding loan balance against the associated allowance for credit losses based on our determination that the loans are uncollectible. 105 (cid:27)ro(cid:50)(cid:39)r(cid:54)y(cid:5) (cid:50)(cid:46)a(cid:48)(cid:54) a(cid:48)(cid:38) (cid:39)(cid:51)u(cid:43)(cid:50)m(cid:39)(cid:48)(cid:54)(cid:5) (cid:48)(cid:39)(cid:54) Property, plant and equipment, net consisted of the following at December 31, 2020 and 2019 (in thousands): (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Office equipment and furniture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property, plant and equipment, gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) 14,49(cid:23) (cid:4) (cid:21)93,(cid:22)(cid:21)2 2,1(cid:23)4,23(cid:21) 143,(cid:21)(cid:23)5 41,459 419,(cid:22)(cid:21)(cid:21) 3,49(cid:22),40(cid:21) (1,095,121) 14,241 (cid:21)(cid:21)4,2(cid:21)(cid:21) 2,43(cid:21),99(cid:22) 159,(cid:23)4(cid:23) 4(cid:23),(cid:22)(cid:22)2 243,10(cid:22) 3,5(cid:21)(cid:22),231 (1,3(cid:23)(cid:21),0(cid:23)2) (cid:4) 2,402,2(cid:23)5 (cid:4) 2,1(cid:23)1,149 We assess our property, plant and equipment for impairment whenever events or changes in circumstances arise that may indicate that the carrying amount of such assets may not be recoverable. We consider a long(cid:12)lived asset to be abandoned after we have ceased use of the asset and we have no intent to use or repurpose it in the future, and such abandoned assets are recorded at their salvage value, if any. During 2020, we recorded an impairment loss of (cid:4)1(cid:22).4 million in (cid:87)Cost of sales(cid:88) for certain abandoned module manufacturing equipment, including framing and assembly tools, as such equipment was no longer compatible with our long(cid:12)term module technology roadmap. Depreciation of property, plant and equipment was (cid:4)19(cid:23).9 million, (cid:4)1(cid:22)(cid:21).4 million, and (cid:4)109.1 million for the years ended December 31, 2020, 2019, and 201(cid:23), respectively. (cid:27)(cid:33) (cid:53)o(cid:46)ar (cid:50)o(cid:57)(cid:39)r (cid:53)y(cid:53)(cid:54)(cid:39)m(cid:53)(cid:5) (cid:48)(cid:39)(cid:54) P(cid:48) solar power systems, net consisted of the following at December 31, 2020 and 2019 (in thousands): P(cid:48) solar power systems, gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P(cid:48) solar power systems, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) (cid:13)(cid:11)(cid:13)(cid:11) 29(cid:23),0(cid:21)(cid:22) (cid:4) (54,(cid:21)(cid:22)1) 243,39(cid:21) (cid:4) (cid:13)(cid:11)(cid:12)(cid:20) 530,004 (53,02(cid:22)) 4(cid:22)(cid:21),9(cid:22)(cid:22) Depreciation of P(cid:48) solar power systems was (cid:4)19.(cid:21) million, (cid:4)1(cid:23).(cid:22) million, and (cid:4)15.3 million for the years ended December 31, 2020, 2019, and 201(cid:23), respectively. (cid:27)ro(cid:44)(cid:39)(cid:37)(cid:54) a(cid:53)(cid:53)(cid:39)(cid:54)(cid:53) Pro(cid:61)ect assets consisted of the following at December 31, 2020 and 2019 (in thousands): Pro(cid:61)ect assets (cid:85) development costs, including pro(cid:61)ect acquisition and land costs . . . . . . . . . . . . Pro(cid:61)ect assets (cid:85) construction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pro(cid:61)ect assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pro(cid:61)ect assets (cid:85) current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pro(cid:61)ect assets (cid:85) noncurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) (cid:4) (cid:4) (cid:13)(cid:11)(cid:13)(cid:11) 1(cid:22)(cid:21),34(cid:21) (cid:4) 19(cid:22),031 3(cid:22)3,3(cid:22)(cid:22) (cid:4) (cid:86) (cid:4) 3(cid:22)3,3(cid:22)(cid:22) (cid:4) (cid:13)(cid:11)(cid:12)(cid:20) 254,4(cid:21)(cid:21) (cid:23)2,(cid:21)54 33(cid:22),120 3,524 333,59(cid:21) 10(cid:21) (cid:15)a(cid:50)(cid:43)(cid:54)a(cid:46)(cid:43)(cid:60)(cid:39)(cid:38) (cid:43)(cid:48)(cid:54)(cid:39)r(cid:39)(cid:53)(cid:54) The components of interest expense and capitalized interest were as follows during the years ended December 31, 2020, 2019, and 201(cid:23) (in thousands): Interest cost incurred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest cost capitalized (cid:85) pro(cid:61)ect assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) (25,(cid:23)34) (cid:4) 1,(cid:22)9(cid:23) (24,03(cid:21)) (cid:4) (29,(cid:21)5(cid:21)) (cid:4) 2,590 (2(cid:22),0(cid:21)(cid:21)) (cid:4) (31,(cid:22)52) 5,(cid:23)31 (25,921) (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:19) (cid:26)(cid:54)(cid:42)(cid:39)r a(cid:53)(cid:53)(cid:39)(cid:54)(cid:53) Other assets consisted of the following at December 31, 2020 and 2019 (in thousands): Operating lease assets (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Advanced payments for raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable, unbilled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Indirect tax receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes receivable (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:13)(cid:11)(cid:13)(cid:11) 22(cid:21),(cid:21)(cid:21)4 (cid:4) (cid:4) 9(cid:22),(cid:23)(cid:23)3 44,(cid:23)4(cid:22) 22,(cid:22)22 14,(cid:23)49 350 3(cid:21) 2(cid:21),(cid:22)(cid:22)9 434,130 (cid:4) (cid:4) (cid:13)(cid:11)(cid:12)(cid:20) 145,(cid:22)11 59,(cid:23)0(cid:21) (cid:23)0,0(cid:22)2 (cid:86) 9,44(cid:21) (cid:23),194 4,10(cid:21) 22,591 329,92(cid:21) (cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86) (1) See Note 9. (cid:2)Leases(cid:2) to our consolidated financial statements for discussion of our lease arrangements. (2) In April 2009, we entered into a credit facility agreement with a solar power pro(cid:61)ect entity of one of our customers for an available amount of (cid:90)1(cid:22).5 million to provide financing for a P(cid:48) solar power system. The credit facility bore interest at (cid:23).0(cid:5) per annum, payable quarterly, and the full amount was due in December 202(cid:21). As of December 31, 2019, the balance outstanding on the credit facility was (cid:90)(cid:22).0 million ((cid:4)(cid:22).(cid:23) million). In October 2020, the pro(cid:61)ect entity repaid the outstanding balance of the credit facility. The remaining notes receivable balance relates to a separate arrangement with another third party. (cid:13)(cid:53)(cid:53)(cid:39)(cid:54)(cid:53) a(cid:48)(cid:38) (cid:46)(cid:43)a(cid:36)(cid:43)(cid:46)(cid:43)(cid:54)(cid:43)(cid:39)(cid:53) (cid:42)(cid:39)(cid:46)(cid:38) (cid:40)or (cid:53)a(cid:46)(cid:39) Following an evaluation of the long(cid:12)term cost structure, competitiveness, and risk(cid:12)ad(cid:61)usted returns of our O(cid:6)M services business, we received an offer to purchase certain portions of the business and determined it is in the best interest of our stockholders to pursue this transaction. As a result, in August 2020 we entered into an agreement with Clairvest for the sale of our North American O(cid:6)M operations. The completion of the transaction is contingent on a number of closing conditions, including the receipt of certain third(cid:12)party consents and other customary closing conditions. Assuming satisfaction of such closing conditions, we expect the sale to be completed in the first half of 2021. Accordingly, we classified the assets and liabilities we expect to transfer to Clairvest as assets held for sale and liabilities held for sale on our consolidated balance sheet as of December 31, 2020. Following an evaluation of the long(cid:12)term cost structure, competitiveness, and risk(cid:12)ad(cid:61)usted returns of our U.S. pro(cid:61)ect development business, we have determined it is in the best interest of our stockholders to pursue the sale of this business. On January 24, 2021, we entered into an agreement with OMERS for the sale of our U.S. pro(cid:61)ect development operations, which comprises the business of developing, contracting for the construction of, and selling utility(cid:12)scale P(cid:48) solar power systems. The transaction includes our approximately 10 GWAC utility(cid:12)scale solar pro(cid:61)ect pipeline, including the advanced(cid:12)stage Horizon, Madison, Ridgely, Rabbitbrush, and Oak Trail pro(cid:61)ects that are expected to commence construction in the next two years(cid:26) the 30 MWAC Barilla Solar pro(cid:61)ect, which is operational(cid:26) and certain other equipment. In addition, OMERS has agreed to certain module purchase commitments. The 10(cid:22) completion of the transaction is contingent on a number of closing conditions, including the receipt of regulatory approval from FERC, the expiration of the mandatory waiting period under U.S. antitrust laws, a review of the transaction by CFIUS, and other customary closing conditions. Assuming satisfaction of such closing conditions, we expect the sale to be completed in the first half of 2021. Accordingly, we classified the assets and liabilities we expect to transfer to OMERS upon completion of this transaction as assets held for sale and liabilities held for sale on our consolidated balance sheet as of December 31, 2020. The following table summarizes our assets and liabilities held for sale at December 31, 2020 (in thousands): O(cid:63)erati(cid:62)n(cid:66) (cid:3) (cid:35)aintenan(cid:50)e (cid:38)r(cid:62)(cid:57)e(cid:50)t De(cid:69)el(cid:62)(cid:63)(cid:60)ent T(cid:62)tal Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) Accounts receivable trade, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable, unbilled and retainage, net . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance of systems parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P(cid:48) solar power systems, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pro(cid:61)ect assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:86) (cid:4) 1(cid:21),53(cid:22) 3,(cid:21)(cid:23)(cid:22) 243 (cid:22)2 12,5(cid:22)(cid:22) 5,5(cid:22)(cid:22) (cid:86) (cid:86) 25 3(cid:23),(cid:22)1(cid:23) (cid:4) 2,(cid:21)92 (cid:4) 4,35(cid:22) 2,(cid:22)30 944 4,350 15,0(cid:22)3 (cid:4) 2,03(cid:22) (cid:4) (cid:22)5 (cid:86) (cid:86) 34,1(cid:22)3 1,1(cid:21)9 215 10,99(cid:22) (cid:21)5,(cid:21)(cid:21)0 2,(cid:21)41 11(cid:21),9(cid:21)(cid:22) (cid:4) 299 (cid:4) 1,23(cid:21) (cid:86) 9(cid:21)0 (cid:23),053 10,54(cid:23) (cid:4) 2,03(cid:22) 1(cid:21),(cid:21)12 3,(cid:21)(cid:23)(cid:22) 243 34,245 13,(cid:22)4(cid:21) 5,(cid:22)92 10,99(cid:22) (cid:21)5,(cid:21)(cid:21)0 2,(cid:21)(cid:21)(cid:21) 155,(cid:21)(cid:23)5 2,991 5,593 2,(cid:22)30 1,904 12,403 25,(cid:21)21 (cid:13)(cid:37)(cid:37)ru(cid:39)(cid:38) (cid:39)(cid:58)(cid:50)(cid:39)(cid:48)(cid:53)(cid:39)(cid:53) Accrued expenses consisted of the following at December 31, 2020 and 2019 (in thousands): Accrued pro(cid:61)ect costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Product warranty liability (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:23)1,3(cid:23)0 (cid:4) (cid:21)(cid:21),543 51,(cid:21)(cid:23)5 25,(cid:22)04 22,2(cid:22)(cid:23) (cid:21)2,(cid:23)(cid:22)(cid:22) 310,4(cid:21)(cid:22) (cid:4) 91,9(cid:22)1 42,(cid:23)34 (cid:21)5,1(cid:22)0 39,3(cid:21)(cid:21) 20,291 91,(cid:21)2(cid:23) 351,2(cid:21)0 (cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86) (1) See Note 13. (cid:87)Commitments and Contingencies(cid:88) to our consolidated financial statements for discussion of our (cid:87)Product Warranties.(cid:88) 10(cid:23) (cid:26)(cid:54)(cid:42)(cid:39)r (cid:37)urr(cid:39)(cid:48)(cid:54) (cid:46)(cid:43)a(cid:36)(cid:43)(cid:46)(cid:43)(cid:54)(cid:43)(cid:39)(cid:53) Other current liabilities consisted of the following at December 31, 2020 and 2019 (in thousands): Other taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating lease liabilities (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Derivative instruments (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contingent consideration (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) 30,041 (cid:4) 14,00(cid:21) 5,2(cid:23)0 2,243 31,4(cid:21)(cid:22) (cid:23)3,03(cid:22) (cid:4) 994 11,102 2,5(cid:23)2 2,395 11,05(cid:22) 2(cid:23),130 (cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86) (1) See Note 9. (cid:2)Leases(cid:2) to our consolidated financial statements for discussion of our lease arrangements. (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (2) See Note (cid:23). (cid:87)Derivative Financial Instruments(cid:88) to our consolidated financial statements for discussion of our derivative instruments. (3) See Note 13. (cid:87)Commitments and Contingencies(cid:88) to our consolidated financial statements for discussion of our (cid:87)Contingent Consideration(cid:88) arrangements. (cid:26)(cid:54)(cid:42)(cid:39)r (cid:46)(cid:43)a(cid:36)(cid:43)(cid:46)(cid:43)(cid:54)(cid:43)(cid:39)(cid:53) Other liabilities consisted of the following at December 31, 2020 and 2019 (in thousands): Operating lease liabilities (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Product warranty liability (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax liabilities, net (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Derivative instruments (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transition tax liability (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contingent consideration (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) (cid:13)(cid:11)(cid:13)(cid:11) 1(cid:23)9,034 (cid:4) (cid:22)2,(cid:23)1(cid:23) 44,919 23,(cid:21)(cid:22)1 (cid:21),515 341 (cid:86) (cid:86) 34,92(cid:23) 3(cid:22)2,22(cid:21) (cid:4) (cid:13)(cid:11)(cid:12)(cid:20) 112,515 109,50(cid:21) (cid:22)1,43(cid:23) (cid:21),493 90,201 (cid:22),439 (cid:22)0,04(cid:22) 4,500 3(cid:21),(cid:21)2(cid:22) 50(cid:23),(cid:22)(cid:21)(cid:21) (cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86) (1) See Note 9. (cid:2)Leases(cid:2) to our consolidated financial statements for discussion of our lease arrangements. (2) See Note 13. (cid:87)Commitments and Contingencies(cid:88) to our consolidated financial statements for discussion of our (cid:87)Product Warranties(cid:88) and (cid:87)Contingent Consideration(cid:88) arrangements. (3) See Note 1(cid:22). (cid:87)Income Taxes(cid:88) to our consolidated financial statements for discussion of our net deferred tax assets and liabilities. (4) See Note (cid:23). (cid:87)Derivative Financial Instruments(cid:88) to our consolidated financial statements for discussion of our derivative instruments. (5) See Note 1(cid:22). (cid:87)Income Taxes(cid:88) to our consolidated financial statements for discussion of the one(cid:12)time transition tax on accumulated earnings of foreign subsidiaries as a result of the Tax Act. 109 (cid:19). Deri(cid:69)ati(cid:69)e Finan(cid:50)ial In(cid:66)tru(cid:60)ent(cid:66) As a global company, we are exposed in the normal course of business to interest rate, foreign currency, and commodity price risks that could affect our financial position, results of operations, and cash flows. We use derivative instruments to hedge against these risks and only hold such instruments for hedging purposes, not for speculative or trading purposes. Depending on the terms of the specific derivative instruments and market conditions, some of our derivative instruments may be assets and others liabilities at any particular balance sheet date. We report all of our derivative instruments at fair value and account for changes in the fair value of derivative instruments within (cid:87)Accumulated other comprehensive loss(cid:88) if the derivative instruments qualify for hedge accounting. For those derivative instruments that do not qualify for hedge accounting (i.e., (cid:87)economic hedges(cid:88)), we record the changes in fair value directly to earnings. See Note 10. (cid:87)Fair (cid:48)alue Measurements(cid:88) to our consolidated financial statements for information about the techniques we use to measure the fair value of our derivative instruments. The following tables present the fair values of derivative instruments included in our consolidated balance sheets as of December 31, 2020 and 2019 (in thousands): Derivatives designated as hedging instruments: Foreign exchange forward contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commodity swap contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total derivatives designated as hedging instruments . . . . . . . . . . . . . . . . . . . . . Derivatives not designated as hedging instruments: Foreign exchange forward contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total derivatives not designated as hedging instruments . . . . . . . . . . . . . . . . . . Total derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:13)(cid:11) (cid:38)re(cid:63)ai(cid:51) E(cid:71)(cid:63)en(cid:66)e(cid:66) an(cid:51) Ot(cid:55)er Current A(cid:66)(cid:66)et(cid:66) Ot(cid:55)er Current Lia(cid:49)ilitie(cid:66) Ot(cid:55)er Lia(cid:49)ilitie(cid:66) (cid:4) (cid:4) (cid:4) (cid:4) (cid:4) (cid:86) (cid:4) 1,4(cid:22)(cid:23) 1,4(cid:22)(cid:23) (cid:4) 2,504 (cid:4) (cid:86) 2,504 (cid:4) 1,(cid:23)3(cid:22) (cid:4) 1,(cid:23)3(cid:22) (cid:4) 3,315 (cid:4) 2,(cid:22)(cid:22)(cid:21) (cid:4) 2,(cid:22)(cid:22)(cid:21) (cid:4) 5,2(cid:23)0 (cid:4) De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:12)(cid:20) 341 (cid:86) 341 (cid:86) (cid:86) 341 (cid:38)re(cid:63)ai(cid:51) E(cid:71)(cid:63)en(cid:66)e(cid:66) an(cid:51) Ot(cid:55)er Current A(cid:66)(cid:66)et(cid:66) Ot(cid:55)er A(cid:66)(cid:66)et(cid:66) Ot(cid:55)er Current Lia(cid:49)ilitie(cid:66) Ot(cid:55)er Lia(cid:49)ilitie(cid:66) Derivatives designated as hedging instruments: Foreign exchange forward contracts . . . . . . . . . . . . . . . . . Total derivatives designated as hedging instruments . . . . . . . . (cid:4) (cid:4) 22(cid:21) (cid:4) 22(cid:21) (cid:4) 139 (cid:4) 139 (cid:4) 3(cid:21)9 (cid:4) 3(cid:21)9 (cid:4) 230 230 Derivatives not designated as hedging instruments: Foreign exchange forward contracts . . . . . . . . . . . . . . . . . Interest rate swap contracts . . . . . . . . . . . . . . . . . . . . . . . . Total derivatives not designated as hedging instruments . . . . Total derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) (cid:4) 9(cid:22)3 (cid:4) (cid:86) (cid:4) 9(cid:22)3 (cid:4) 1,199 (cid:4) (cid:86) (cid:4) (cid:86) (cid:86) (cid:4) 139 (cid:4) 1,(cid:23)0(cid:22) (cid:4) 40(cid:21) 2,213 (cid:4) 2,5(cid:23)2 (cid:4) (cid:86) (cid:22),209 (cid:22),209 (cid:22),439 110 The following table presents the pretax amounts related to derivative instruments designated as cash flow hedges affecting accumulated other comprehensive income (loss) and our consolidated statements of operations for the years ended December 31, 2020, 2019, and 201(cid:23) (in thousands): Balance as of December 31, 201(cid:22) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amounts recognized in other comprehensive income (loss) . . . . . . . . . . . . . . . Amounts reclassified to earnings impacting: (cid:4) Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency (loss) income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other (expense) income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance as of December 31, 201(cid:23) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amounts recognized in other comprehensive income (loss) . . . . . . . . . . . . . . . Amounts reclassified to earnings impacting: Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance as of December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amounts recognized in other comprehensive income (loss) . . . . . . . . . . . . . . . Amounts reclassified to earnings impacting: F(cid:62)reign E(cid:71)(cid:50)(cid:55)ange F(cid:62)r(cid:70)ar(cid:51) C(cid:62)ntra(cid:50)t(cid:66) C(cid:62)(cid:60)(cid:60)(cid:62)(cid:51)it(cid:72) S(cid:70)a(cid:63) C(cid:62)ntra(cid:50)t(cid:66) T(cid:62)tal (1,(cid:22)23) (cid:4) (3,(cid:22)(cid:21)0) (cid:86) (cid:4) (cid:86) (1,(cid:22)23) (3,(cid:22)(cid:21)0) 1,(cid:21)9(cid:23) 212 5,44(cid:23) (54(cid:21)) 1,329 (1,0(cid:23)(cid:21)) (124) (1,0(cid:23)1) (9(cid:21)2) (3,(cid:23)(cid:23)1) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) 1,4(cid:22)2 1,(cid:21)9(cid:23) 212 5,44(cid:23) (54(cid:21)) 1,329 (1,0(cid:23)(cid:21)) (124) (1,0(cid:23)1) (9(cid:21)2) (2,409) Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance as of December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) 1,199 (3,(cid:21)44) (cid:4) (cid:86) 1,4(cid:22)2 (cid:4) 1,199 (2,1(cid:22)2) During the years ended December 31, 2020 and 2019, we recognized unrealized gains of (cid:4)1.2 million and (cid:4)0.(cid:23) million, respectively, within (cid:87)Cost of sales(cid:88) for amounts excluded from effectiveness testing for our foreign exchange forward contracts designated as cash flow hedges. During the year ended December 31, 201(cid:23), we recognized unrealized gains of (cid:4)0.5 million within (cid:87)Other (expense) income, net(cid:88) for amounts excluded from effectiveness testing for our foreign exchange forward contracts designated as cash flow hedges. We recorded no amounts related to ineffective portions of our derivative instruments designated as cash flow hedges during the year ended December 31, 201(cid:23). The following table presents gains and losses related to derivative instruments not designated as hedges affecting our consolidated statements of operations for the years ended December 31, 2020, 2019, and 201(cid:23) (in thousands): In(cid:50)(cid:62)(cid:60)e State(cid:60)ent Line Ite(cid:60) (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:19) A(cid:60)(cid:62)unt (cid:62)(cid:53) Gain (cid:4)L(cid:62)(cid:66)(cid:66)(cid:5) Re(cid:50)(cid:62)gni(cid:73)e(cid:51) in In(cid:50)(cid:62)(cid:60)e Interest rate swap contracts . . . . . . . . Cost of sales Foreign exchange forward contracts . Cost of sales Foreign exchange forward contracts . Foreign currency (loss) income, net Interest rate swap contracts . . . . . . . . Interest expense, net (cid:4) (cid:86) (cid:4) (4(cid:21)2) ((cid:21),31(cid:22)) ((cid:22),259) (1,(cid:21)5(cid:21)) (cid:4) (cid:86) 3,(cid:22)1(cid:21) ((cid:23),532) (cid:86) (cid:86) 12,113 ((cid:23),(cid:21)43) (cid:20)(cid:48)(cid:54)(cid:39)r(cid:39)(cid:53)(cid:54) (cid:29)a(cid:54)(cid:39) (cid:29)(cid:43)(cid:53)(cid:45) We primarily use interest rate swap contracts to mitigate our exposure to interest rate fluctuations associated with certain of our debt instruments. We do not use such swap contracts for speculative or trading purposes. During the years ended December 31, 2020, 2019, and 201(cid:23), the ma(cid:61)ority of our interest rate swap contracts related to pro(cid:61)ect specific debt facilities. Such swap contracts did not qualify for accounting as cash flow hedges in accordance with ASC (cid:23)15 due to our expectation to sell the associated pro(cid:61)ects before the maturity of their pro(cid:61)ect specific debt 111 financings and corresponding swap contracts. Accordingly, changes in the fair values of these swap contracts were recorded directly to (cid:87)Interest expense, net.(cid:88) In December 2019, FS Japan Pro(cid:61)ect 31 GK, our indirectly wholly(cid:12)owned subsidiary and pro(cid:61)ect company, entered into an interest rate swap contract to hedge a portion of the floating rate term loan facility under the pro(cid:61)ect(cid:89)s Anamizu Credit Agreement (as defined in Note 12. (cid:87)Debt(cid:88) to our consolidated financial statements). Such swap had an initial notional value of (cid:84)0.9 billion and entitled the pro(cid:61)ect to receive a six(cid:12)month floating Tokyo Interbank Offered Rate ((cid:87)TIBOR(cid:88)) plus 0.(cid:22)0(cid:5) interest rate while requiring the pro(cid:61)ect to pay a fixed rate of 1.1925(cid:5). In September 2020, we completed the sale of our Anamizu pro(cid:61)ect, and its interest rate swap contract and outstanding loan balance were assumed by the customer. As of December 31, 2019, the notional value of the interest rate swap contract was (cid:84)0.9 billion ((cid:4)(cid:23).0 million). In January 201(cid:22), FS Japan Pro(cid:61)ect 12 GK, our indirect wholly(cid:12)owned subsidiary and pro(cid:61)ect company, entered into an interest rate swap contract to hedge a portion of the floating rate senior loan facility under the pro(cid:61)ect(cid:89)s Ishikawa Credit Agreement (as defined in Note 12. (cid:87)Debt(cid:88) to our consolidated financial statements). Such swap had an initial notional value of (cid:84)5.(cid:22) billion and entitled the pro(cid:61)ect to receive a six(cid:12)month floating TIBOR plus 0.(cid:22)5(cid:5) interest rate while requiring the pro(cid:61)ect to pay a fixed rate of 1.4(cid:23)2(cid:5). In September 2020, we repaid the remaining loan balance and settled the swap contract prior to completing the sale of our Ishikawa pro(cid:61)ect. As of December 31, 2019, the notional value of the interest rate swap contract was (cid:84)1(cid:23).(cid:22) billion ((cid:4)1(cid:22)1.(cid:22) million). For(cid:39)(cid:43)(cid:41)(cid:48) (cid:15)urr(cid:39)(cid:48)(cid:37)y (cid:29)(cid:43)(cid:53)(cid:45) Cash (cid:20)(cid:47)o(cid:58) (cid:19)(cid:59)posure We expect certain of our subsidiaries to have future cash flows that will be denominated in currencies other than the subsidiaries(cid:89) functional currencies. Changes in the exchange rates between the functional currencies of our subsidiaries and the other currencies in which they transact will cause fluctuations in the cash flows we expect to receive or pay when these cash flows are realized or settled. Accordingly, we enter into foreign exchange forward contracts to hedge a portion of these forecasted cash flows. As of December 31, 2020 and 2019, these foreign exchange forward contracts hedged our forecasted cash flows for periods up to 20 months and 22 months, respectively. These foreign exchange forward contracts qualify for accounting as cash flow hedges in accordance with ASC (cid:23)15, and we designated them as such. We report unrealized gains or losses on such contracts in (cid:87)Accumulated other comprehensive loss(cid:88) and subsequently reclassify applicable amounts into earnings when the hedged transaction occurs and impacts earnings. We determined that these derivative financial instruments were highly effective as cash flow hedges as of December 31, 2020 and 2019. As of December 31, 2020 and 2019, the notional values associated with our foreign exchange forward contracts qualifying as cash flow hedges were as follows (notional amounts and U.S. dollar equivalents in millions): Curren(cid:50)(cid:72) U.S. dollar (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N(cid:62)ti(cid:62)nal A(cid:60)(cid:62)unt (cid:4)43.4 USD E(cid:64)ui(cid:69)alent (cid:4)43.4 De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:13)(cid:11) Curren(cid:50)(cid:72) U.S. dollar (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N(cid:62)ti(cid:62)nal A(cid:60)(cid:62)unt (cid:4)(cid:21)9.9 USD E(cid:64)ui(cid:69)alent (cid:4)(cid:21)9.9 (cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86) (1) These derivative instruments represent hedges of outstanding payables denominated in U.S. dollars at certain of our foreign subsidiaries whose functional currencies are other than the U.S. dollar. De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:12)(cid:20) 112 In the following 12 months, we expect to reclassify to earnings (cid:4)3.3 million of net unrealized loss related to foreign exchange forward contracts that are included in (cid:87)Accumulated other comprehensive loss(cid:88) at December 31, 2020 as we realize the earnings effects of the related forecasted transactions. The amount we ultimately record to earnings will depend on the actual exchange rates when we realize the related forecasted transactions. (cid:32)ransaction (cid:19)(cid:59)posure and (cid:19)conomic (cid:22)edging Many of our subsidiaries have assets and liabilities (primarily cash, receivables, deferred taxes, payables, accrued expenses, and solar module collection and recycling liabilities) that are denominated in currencies other than the subsidiaries(cid:89) functional currencies. Changes in the exchange rates between the functional currencies of our subsidiaries and the other currencies in which these assets and liabilities are denominated will create fluctuations in our reported consolidated statements of operations and cash flows. We may enter into foreign exchange forward contracts or other financial instruments to economically hedge assets and liabilities against the effects of currency exchange rate fluctuations. The gains and losses on such foreign exchange forward contracts will economically offset all or part of the transaction gains and losses that we recognize in earnings on the related foreign currency denominated assets and liabilities. We also enter into foreign exchange forward contracts to economically hedge balance sheet and other exposures related to transactions between certain of our subsidiaries and transactions with third parties. Such contracts are considered economic hedges and do not qualify for hedge accounting. Accordingly, we recognize gains or losses from the fluctuations in foreign exchange rates and the fair value of these derivative contracts in (cid:87)Foreign currency (loss) income, net(cid:88) on our consolidated statements of operations. As of December 31, 2020 and 2019, the notional values of our foreign exchange forward contracts that do not qualify for hedge accounting were as follows (notional amounts and U.S. dollar equivalents in millions): Tran(cid:66)a(cid:50)ti(cid:62)n Curren(cid:50)(cid:72) Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . Australian dollar Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . Brazilian real Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canadian dollar Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . Chilean peso Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chilean peso Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . Euro Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Euro Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . Malaysian ringgit Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Malaysian ringgit Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mexican peso Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . Indian rupee Japanese yen Japanese yen Singapore dollar De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:13)(cid:11) N(cid:62)ti(cid:62)nal A(cid:60)(cid:62)unt AUD 3.2 BRL 2.(cid:21) CAD (cid:23).9 CLP 2,00(cid:21).0 CLP 4,4(cid:22)(cid:21).(cid:22) (cid:90)140.0 (cid:90)(cid:21)3.(cid:21) INR (cid:21)19.2 (cid:84)1,593.(cid:22) (cid:84)20,(cid:21)5(cid:21).(cid:21) MYR (cid:21)9.3 MYR 24.9 MXN 34.(cid:21) SGD 2.9 USD E(cid:64)ui(cid:69)alent (cid:4)2.5 (cid:4)0.5 (cid:4)(cid:22).0 (cid:4)2.(cid:23) (cid:4)(cid:21).3 (cid:4)1(cid:22)2.1 (cid:4)(cid:22)(cid:23).2 (cid:4)(cid:23).4 (cid:4)15.5 (cid:4)200.5 (cid:4)1(cid:22).2 (cid:4)(cid:21).2 (cid:4)1.(cid:22) (cid:4)2.2 113 Tran(cid:66)a(cid:50)ti(cid:62)n Curren(cid:50)(cid:72) Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . Australian dollar Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Australian dollar Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . Brazilian real Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brazilian real Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . Canadian dollar Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canadian dollar Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . Chilean peso Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chilean peso Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . Euro Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Euro Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . Malaysian ringgit Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Malaysian ringgit Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mexican peso Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . Indian rupee Japanese yen Japanese yen Singapore dollar De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:12)(cid:20) N(cid:62)ti(cid:62)nal A(cid:60)(cid:62)unt AUD 14.9 AUD 11.1 BRL 13.2 BRL 4.3 CAD 4.5 CAD 1.(cid:21) CLP 1,493.1 CLP 3,(cid:23)(cid:21)(cid:21).1 (cid:90)(cid:23)(cid:21).1 (cid:90)11(cid:21).3 INR 1,2(cid:23)3.(cid:23) (cid:84)3,(cid:21)25.5 (cid:84)23,0(cid:23)9.5 MYR (cid:23)(cid:23).(cid:21) MYR 41.3 MXN 34.(cid:21) SGD 2.9 USD E(cid:64)ui(cid:69)alent (cid:4)10.4 (cid:4)(cid:22).(cid:23) (cid:4)3.3 (cid:4)1.1 (cid:4)3.4 (cid:4)1.2 (cid:4)2.0 (cid:4)5.1 (cid:4)9(cid:21).5 (cid:4)130.3 (cid:4)1(cid:23).0 (cid:4)33.3 (cid:4)212.2 (cid:4)21.(cid:21) (cid:4)10.1 (cid:4)1.(cid:23) (cid:4)2.2 (cid:15)ommo(cid:38)(cid:43)(cid:54)y (cid:27)r(cid:43)(cid:37)(cid:39) (cid:29)(cid:43)(cid:53)(cid:45) We use commodity swap contracts to mitigate our exposure to commodity price fluctuations for certain raw materials used in the production of our modules. In August 2020, we entered into a commodity swap contract to hedge a portion of our forecasted cash flows for purchases of aluminum frames for a one(cid:12)year period. Such swap had an initial notional value based on metric tons of forecasted aluminum purchases, equivalent to (cid:4)24.9 million, and entitled us to receive a three(cid:12)month average London Metals Exchange price for aluminum while requiring us to pay certain fixed prices. The notional amount of the commodity swap contract proportionately ad(cid:61)usts with forecasted purchases of aluminum frames. As of December 31, 2020, the notional value associated with this contract was (cid:4)12.3 million. This commodity swap contract qualifies for accounting as a cash flow hedge in accordance with ASC (cid:23)15, and we designated it as such. We report unrealized gains or losses on such contract in (cid:87)Accumulated other comprehensive loss(cid:88) and subsequently reclassify applicable amounts into earnings when the hedged transaction occurs and impacts earnings. We determined that this derivative financial instrument was highly effective as a cash flow hedge as of December 31, 2020. In the following 12 months, we expect to reclassify into earnings (cid:4)1.5 million of net unrealized gains related to this commodity swap contract that are included in (cid:87)Accumulated other comprehensive loss(cid:88) at December 31, 2020 as we realize the earnings effects of the related forecasted transactions. The amount we ultimately record to earnings will depend on the actual commodity pricing when we realize the related forecasted transactions. 114 (cid:20). Lea(cid:66)e(cid:66) Our lease arrangements include land associated with our systems pro(cid:61)ects, our corporate and administrative offices, land for our international manufacturing facilities, and certain of our manufacturing equipment. Such leases primarily relate to assets located in the United States, Japan, Malaysia, and (cid:48)ietnam. The following table presents certain quantitative information related to our lease arrangements for the year ended December 31, 2020 and 2019, and as of December 31, 2020 and 2019 (in thousands): Operating lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:48)ariable lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Short(cid:12)term lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments of amounts included in the measurement of operating lease liabilities . . . . . . . . . . . . Lease assets obtained in exchange for operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . Operating lease assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating lease liabilities (cid:85) current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating lease liabilities (cid:85) noncurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) 1(cid:23),(cid:22)39 2,(cid:21)1(cid:21) 2,(cid:21)2(cid:23) 23,9(cid:23)3 19,192 9(cid:23),(cid:23)22 (cid:4) (cid:4) (cid:4) (cid:4) 21,(cid:23)33 3,51(cid:23) (cid:22),511 32,(cid:23)(cid:21)2 21,(cid:21)(cid:22)(cid:23) 1(cid:22)9,(cid:23)04 (cid:4) (cid:4) (cid:4) (cid:4) (cid:4) De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:13)(cid:11) 22(cid:21),(cid:21)(cid:21)4 14,00(cid:21) 1(cid:23)9,034 (cid:4) De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:12)(cid:20) 145,(cid:22)11 11,102 112,515 Weighted(cid:12)average remaining lease term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted(cid:12)average discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 years 2.9 (cid:5) 15 years 4.3 (cid:5) As of December 31, 2020, the future payments associated with our lease liabilities were as follows (in thousands): 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total future payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) 1(cid:22),(cid:23)5(cid:23) 1(cid:22),3(cid:22)(cid:23) 1(cid:22),4(cid:23)3 1(cid:22),15(cid:23) 1(cid:21),(cid:22)2(cid:21) 1(cid:21)(cid:21),1(cid:21)(cid:23) 252,(cid:22)(cid:22)1 (49,(cid:22)31) 203,040 T(cid:62)tal Lea(cid:66)e Lia(cid:49)ilitie(cid:66) Our lease expense was (cid:4)1(cid:23).9 million for the year ended December 31, 201(cid:23). 115 (cid:12)(cid:11). Fair (cid:44)alue (cid:35)ea(cid:66)ure(cid:60)ent(cid:66) The following is a description of the valuation techniques that we use to measure the fair value of assets and liabilities that we measure and report at fair value on a recurring basis: (cid:82) Cash (cid:19)(cid:52)ui(cid:57)a(cid:47)ents. At December 31, 2020 and 2019, our cash equivalents consisted of money market funds. We value our cash equivalents using observable inputs that reflect quoted prices for securities with identical characteristics and classify the valuation techniques that use these inputs as Level 1. (cid:82) (cid:26)arketa(cid:37)(cid:47)e (cid:31)ecurities and Restricted (cid:26)arketa(cid:37)(cid:47)e (cid:31)ecurities. At December 31, 2020 and 2019, our marketable securities consisted of foreign debt, foreign government obligations, U.S. debt, and time deposits, and our restricted marketable securities consisted of foreign and U.S. government obligations. We value our marketable securities and restricted marketable securities using observable inputs that reflect quoted prices for securities with identical characteristics or quoted prices for securities with similar characteristics and other observable inputs (such as interest rates that are observable at commonly quoted intervals). Accordingly, we classify the valuation techniques that use these inputs as either Level 1 or Level 2 depending on the inputs used. We also consider the effect of our counterparties(cid:89) credit standing in these fair value measurements. (cid:82) (cid:18)eri(cid:57)ati(cid:57)e (cid:15)ssets and (cid:25)ia(cid:37)i(cid:47)ities. At December 31, 2020 and 2019, our derivative assets and liabilities consisted of foreign exchange forward contracts involving ma(cid:61)or currencies, interest rate swap contracts involving ma(cid:61)or interest rates, and commodity swap contracts involving ma(cid:61)or commodity prices. Since our derivative assets and liabilities are not traded on an exchange, we value them using standard industry valuation models. As applicable, these models pro(cid:61)ect future cash flows and discount the amounts to a present value using market(cid:12) based observable inputs, including interest rate curves, credit risk, foreign exchange rates, forward and spot prices for currencies, and forward prices for commodities. These inputs are observable in active markets over the contract term of the derivative instruments we hold, and accordingly, we classify the valuation techniques as Level 2. In evaluating credit risk, we consider the effect of our counterparties(cid:89) and our own credit standing in the fair value measurements of our derivative assets and liabilities, respectively. At December 31, 2020 and 2019, the fair value measurements of our assets and liabilities measured on a recurring basis were as follows (in thousands): Fair (cid:44)alue (cid:35)ea(cid:66)ure(cid:60)ent(cid:66) at Re(cid:63)(cid:62)rting Date U(cid:66)ing (cid:39)u(cid:62)te(cid:51) (cid:38)ri(cid:50)e(cid:66) in A(cid:50)ti(cid:69)e (cid:35)ar(cid:58)et(cid:66) (cid:53)(cid:62)r I(cid:51)enti(cid:50)al A(cid:66)(cid:66)et(cid:66) (cid:4)Le(cid:69)el (cid:12)(cid:5) Signi(cid:53)i(cid:50)ant Ot(cid:55)er O(cid:49)(cid:66)er(cid:69)a(cid:49)le In(cid:63)ut(cid:66) (cid:4)Le(cid:69)el (cid:13)(cid:5) Signi(cid:53)i(cid:50)ant Un(cid:62)(cid:49)(cid:66)er(cid:69)a(cid:49)le In(cid:63)ut(cid:66) (cid:4)Le(cid:69)el (cid:14)(cid:5) De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:13)(cid:11) Assets: Cash equivalents: Money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) 2 (cid:4) 2 (cid:4) (cid:86) (cid:4) Marketable securities: Foreign debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S. debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restricted marketable securities . . . . . . . . . . . . . . . . . . . . Derivative assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) 214,254 14,543 291,2(cid:21)9 2(cid:21)5,2(cid:23)0 3,315 (cid:22)(cid:23)(cid:23),(cid:21)(cid:21)3 (cid:4) (cid:86) (cid:86) 291,2(cid:21)9 (cid:86) (cid:86) 291,2(cid:22)1 (cid:4) 214,254 14,543 (cid:86) 2(cid:21)5,2(cid:23)0 3,315 49(cid:22),392 (cid:4) Liabilities: Derivative liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) 5,(cid:21)21 (cid:4) (cid:86) (cid:4) 5,(cid:21)21 (cid:4) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) 11(cid:21) Fair (cid:44)alue (cid:35)ea(cid:66)ure(cid:60)ent(cid:66) at Re(cid:63)(cid:62)rting Date U(cid:66)ing (cid:39)u(cid:62)te(cid:51) (cid:38)ri(cid:50)e(cid:66) in A(cid:50)ti(cid:69)e (cid:35)ar(cid:58)et(cid:66) (cid:53)(cid:62)r I(cid:51)enti(cid:50)al A(cid:66)(cid:66)et(cid:66) (cid:4)Le(cid:69)el (cid:12)(cid:5) Signi(cid:53)i(cid:50)ant Ot(cid:55)er O(cid:49)(cid:66)er(cid:69)a(cid:49)le In(cid:63)ut(cid:66) (cid:4)Le(cid:69)el (cid:13)(cid:5) Signi(cid:53)i(cid:50)ant Un(cid:62)(cid:49)(cid:66)er(cid:69)a(cid:49)le In(cid:63)ut(cid:66) (cid:4)Le(cid:69)el (cid:14)(cid:5) De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:12)(cid:20) Assets: Cash equivalents: Money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:22),322 (cid:4) (cid:22),322 (cid:4) (cid:86) (cid:4) Marketable securities: Foreign debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign government obligations . . . . . . . . . . . . . . . . . U.S. debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restricted marketable securities . . . . . . . . . . . . . . . . . . . . Derivative assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3(cid:23)(cid:22),(cid:23)20 22,011 (cid:21)(cid:21),134 335,541 223,(cid:22)(cid:23)5 1,33(cid:23) (cid:4) 1,043,951 (cid:4) (cid:86) (cid:86) (cid:86) 335,541 (cid:86) (cid:86) 342,(cid:23)(cid:21)3 (cid:4) 3(cid:23)(cid:22),(cid:23)20 22,011 (cid:21)(cid:21),134 (cid:86) 223,(cid:22)(cid:23)5 1,33(cid:23) (cid:22)01,0(cid:23)(cid:23) (cid:4) Liabilities: Derivative liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) 10,021 (cid:4) (cid:86) (cid:4) 10,021 (cid:4) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) Fa(cid:43)r (cid:33)a(cid:46)u(cid:39) o(cid:40) F(cid:43)(cid:48)a(cid:48)(cid:37)(cid:43)a(cid:46) (cid:20)(cid:48)(cid:53)(cid:54)rum(cid:39)(cid:48)(cid:54)(cid:53) At December 31, 2020 and 2019, the carrying values and fair values of our financial instruments not measured at fair value were as follows (in thousands): De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:13)(cid:11) De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:12)(cid:20) Carr(cid:72)ing (cid:44)alue Fair (cid:44)alue Carr(cid:72)ing (cid:44)alue Fair (cid:44)alue Assets: Notes receivable (cid:85) current . . . . . . . . . . . . . . . . . . . . . . . . . Notes receivable (cid:85) noncurrent . . . . . . . . . . . . . . . . . . . . . . Accounts receivable, unbilled (cid:85) noncurrent . . . . . . . . . . . . (cid:4) (cid:86) (cid:4) 350 22,(cid:22)22 (cid:86) (cid:4) 350 22,09(cid:21) 23,(cid:23)(cid:22)3 (cid:4) (cid:23),194 (cid:86) 24,929 10,2(cid:22)(cid:21) (cid:86) Liabilities: Long(cid:12)term debt, including current maturities (1) . . . . . . . (cid:4) 2(cid:23)(cid:22),149 (cid:4) 29(cid:22),0(cid:22)(cid:21) (cid:4) 4(cid:23)2,(cid:23)92 (cid:4) 504,213 (cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86) (1) Excludes unamortized discounts and issuance costs. The carrying values in our consolidated balance sheets of our trade accounts receivable, current unbilled accounts receivable and retainage, restricted cash, accounts payable, and accrued expenses approximated their fair values due to their nature and relatively short maturities(cid:26) therefore, we excluded them from the foregoing table. The fair value measurements for our notes receivable, noncurrent unbilled accounts receivable, and long(cid:12)term debt are considered Level 2 measurements under the fair value hierarchy. (cid:15)r(cid:39)(cid:38)(cid:43)(cid:54) (cid:29)(cid:43)(cid:53)(cid:45) We have certain financial and derivative instruments that sub(cid:61)ect us to credit risk. These consist primarily of cash, cash equivalents, marketable securities, accounts receivable, restricted cash, restricted marketable securities, notes receivable, foreign exchange forward contracts, and commodity swap contracts. We are exposed to credit losses in the event of nonperformance by the counterparties to our financial and derivative instruments. We place cash, cash equivalents, marketable securities, restricted cash, restricted marketable securities, and foreign exchange forward contracts with various high(cid:12)quality financial institutions and limit the amount of credit risk from any one 11(cid:22) counterparty. We continuously evaluate the credit standing of our counterparty financial institutions. Our net sales are primarily concentrated among a limited number of customers. We monitor the financial condition of our customers and perform credit evaluations whenever considered necessary. Depending upon the sales arrangement, we may require some form of payment security from our customers, including advance payments, parent guarantees, letters of credit, bank guarantees, or surety bonds. We also have PPAs that sub(cid:61)ect us to credit risk in the event our off(cid:12)take counterparties are unable to fulfill their contractual obligations, which may adversely affect our pro(cid:61)ect assets and certain receivables. Accordingly, we closely monitor the credit standing of existing and potential off(cid:12)take counterparties to limit such risks. (cid:12)(cid:12). S(cid:62)lar (cid:35)(cid:62)(cid:51)ule C(cid:62)lle(cid:50)ti(cid:62)n an(cid:51) Re(cid:50)(cid:72)(cid:50)ling Lia(cid:49)ilit(cid:72) We previously established a module collection and recycling program, which has since been discontinued, to collect and recycle modules sold and covered under such program once the modules reach the end of their service lives. For legacy customer sales contracts that were covered under this program, we agreed to pay the costs for the collection and recycling of qualifying solar modules, and the end(cid:12)users agreed to notify us, disassemble their solar power systems, package the solar modules for shipment, and revert ownership rights over the modules back to us at the end of the modules(cid:89) service lives. Accordingly, we recorded any collection and recycling obligations within (cid:87)Cost of sales(cid:88) at the time of sale based on the estimated cost to collect and recycle the covered solar modules. We estimate the cost of our collection and recycling obligations based on the present value of the expected future cost of collecting and recycling the solar modules, which includes estimates for the cost of packaging materials(cid:26) the cost of freight from the solar module installation sites to a recycling center(cid:26) material, labor, and capital costs(cid:26) and by(cid:12) product credits for certain materials recovered during the recycling process. We base these estimates on our experience collecting and recycling solar modules and certain assumptions regarding costs at the time the solar modules will be collected and recycled. In the periods between the time of sale and the related settlement of the collection and recycling obligation, we accrete the carrying amount of the associated liability and classify the corresponding expense within (cid:87)Selling, general and administrative(cid:88) expense on our consolidated statements of operations. We periodically review our estimates of expected future recycling costs and may ad(cid:61)ust our liability accordingly. During the year ended December 31, 2020, we completed our annual cost study of obligations under our module collection and recycling program and reduced the associated liability by (cid:4)1(cid:23).9 million primarily due to changes to the estimated timing of cash flows associated with capital, labor, and maintenance costs and updates to certain valuation assumptions. During the year ended December 31, 201(cid:23), we reduced our module collection and recycling liability by (cid:4)34.2 million primarily due to higher by(cid:12)product credits for glass, lower capital costs resulting from the expanded scale of our recycling facilities, and ad(cid:61)ustments to certain valuation assumptions driven by our increased experience with module recycling. Our module collection and recycling liability was (cid:4)130.(cid:22) million and (cid:4)13(cid:22).(cid:23) million as of December 31, 2020 and 2019, respectively. During the year ended December 31, 2020, we recognized a net benefit of (cid:4)1(cid:23).9 million to cost of sales as a result of the reduction to our module and collection recycling liability described above and accretion expense of (cid:4)5.2 million associated with this liability. During the year ended December 31, 2019, we recognized accretion expense of (cid:4)4.9 million associated with this liability. During the year ended December 31, 201(cid:23), we recognized net benefits of (cid:4)25.0 million to cost of sales and (cid:4)2.9 million to accretion expense as a result of the reduction in our module collection and recycling liability. As of December 31, 2020, a 1(cid:5) increase in the annualized inflation rate used in our estimated future collection and recycling cost per module would increase the liability by (cid:4)21.(cid:21) million, and a 1(cid:5) decrease in that rate would decrease the liability by (cid:4)1(cid:23).(cid:22) million. See Note (cid:21). (cid:87)Restricted Marketable Securities(cid:88) to our consolidated financial statements for more information about our arrangements for funding this liability. 11(cid:23) (cid:12)(cid:13). De(cid:49)t Our long(cid:12)term debt consisted of the following at December 31, 2020 and 2019 (in thousands): L(cid:62)an Agree(cid:60)ent Revolving Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Luz del Norte Credit Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ishikawa Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Japan Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tochigi Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Anamizu Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Kyoto Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Anantapur Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tungabhadra Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long(cid:12)term debt principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: unamortized discounts and issuance costs . . . . . . . . . . . . . . . . . . . . . . . . Total long(cid:12)term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Noncurrent portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Curren(cid:50)(cid:72) USD USD JPY JPY JPY JPY JPY INR INR (cid:24)alan(cid:50)e (cid:4)USD(cid:5) (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:4) (cid:86) (cid:4) 1(cid:23)(cid:21),230 (cid:86) 13,(cid:23)13 39,400 (cid:86) 4(cid:22),(cid:22)0(cid:21) (cid:86) (cid:86) 2(cid:23)(cid:22),149 ((cid:22),91(cid:23)) 2(cid:22)9,231 (41,540) 23(cid:22),(cid:21)91 (cid:4) (cid:4) (cid:86) 1(cid:23)(cid:23),01(cid:22) 215,(cid:23)(cid:22)9 1,(cid:21)(cid:22)(cid:23) 3(cid:22),304 12,13(cid:23) (cid:86) 15,123 12,(cid:22)53 4(cid:23)2,(cid:23)92 (11,195) 4(cid:22)1,(cid:21)9(cid:22) (1(cid:22),510) 454,1(cid:23)(cid:22) (cid:29)(cid:39)(cid:56)o(cid:46)(cid:56)(cid:43)(cid:48)(cid:41) (cid:15)r(cid:39)(cid:38)(cid:43)(cid:54) Fa(cid:37)(cid:43)(cid:46)(cid:43)(cid:54)y Our amended and restated credit agreement with several financial institutions as lenders and JPMorgan Chase Bank, N.A. as administrative agent provides us with a senior secured credit facility (the (cid:87)Revolving Credit Facility(cid:88)) with an aggregate borrowing capacity of (cid:4)500.0 million, which we may increase to (cid:4)(cid:22)50.0 million, sub(cid:61)ect to certain conditions. Borrowings under the credit facility bear interest at (i) London Interbank Offered Rate ((cid:87)LIBOR(cid:88)), ad(cid:61)usted for Eurocurrency reserve requirements, plus a margin of 2.00(cid:5) or (ii) a base rate as defined in the credit agreement plus a margin of 1.00(cid:5) depending on the type of borrowing requested. These margins are also sub(cid:61)ect to ad(cid:61)ustment depending on our consolidated leverage ratio. We had no borrowings under our Revolving Credit Facility as of December 31, 2020 and 2019 and had issued (cid:4)4.3 million and (cid:4)39.3 million, respectively, of letters of credit using availability under the facility. Loans and letters of credit issued under the Revolving Credit Facility are (cid:61)ointly and severally guaranteed by First Solar, Inc.(cid:26) First Solar Electric, LLC(cid:26) First Solar Electric (California), Inc.(cid:26) and First Solar Development, LLC and are secured by interests in substantially all of the guarantors(cid:89) tangible and intangible assets other than certain excluded assets. In addition to paying interest on outstanding principal under the Revolving Credit Facility, we are required to pay a commitment fee at a rate of 0.30(cid:5) per annum, based on the average daily unused commitments under the facility, which may also be ad(cid:61)usted due to changes in our consolidated leverage ratio. We also pay a letter of credit fee based on the applicable margin for Eurocurrency revolving loans on the face amount of each letter of credit and a fronting fee of 0.125(cid:5). Our Revolving Credit Facility matures in July 2022. (cid:23)u(cid:60) (cid:38)(cid:39)(cid:46) (cid:25)or(cid:54)(cid:39) (cid:15)r(cid:39)(cid:38)(cid:43)(cid:54) Fa(cid:37)(cid:43)(cid:46)(cid:43)(cid:54)(cid:43)(cid:39)(cid:53) In August 2014, Parque Solar Fotovoltaico Luz del Norte SpA ((cid:87)Luz del Norte(cid:88)), our indirect wholly(cid:12)owned subsidiary and pro(cid:61)ect company, entered into credit facilities (the (cid:87)Luz del Norte Credit Facilities(cid:88)) with the U.S. International Development Finance Corporation ((cid:87)DFC(cid:88)) and the International Finance Corporation ((cid:87)IFC(cid:88)) to provide limited(cid:12)recourse senior secured debt financing for the design, development, financing, construction, testing, commissioning, operation, and maintenance of a 141 MWAC P(cid:48) solar power plant located near Copiap(cid:78), Chile. In March 201(cid:22), we amended the terms of the DFC and IFC credit facilities. Such amendments (i) allowed for the capitalization of accrued and unpaid interest through March 15, 201(cid:22), along with the capitalization of certain future 119 interest payments as variable rate loans under the credit facilities, (ii) allowed for the conversion of certain fixed rate loans to variable rate loans upon scheduled repayment, (iii) extended the maturity of the DFC and IFC loans until June 203(cid:22), and (iv) canceled the remaining borrowing capacity under the DFC and IFC credit facilities with the exception of the capitalization of certain future interest payments. As of December 31, 2020 and 2019, the balance outstanding on the DFC loans was (cid:4)139.4 million and (cid:4)140.(cid:23) million, respectively. As of December 31, 2020 and 2019, the balance outstanding on the IFC loans was (cid:4)4(cid:21).(cid:23) million and (cid:4)4(cid:22).2 million, respectively. The DFC and IFC loans are secured by liens over all of Luz del Norte(cid:89)s assets and by a pledge of all of the equity interests in the entity. (cid:20)(cid:53)(cid:42)(cid:43)(cid:45)a(cid:57)a (cid:15)r(cid:39)(cid:38)(cid:43)(cid:54) (cid:13)(cid:41)r(cid:39)(cid:39)m(cid:39)(cid:48)(cid:54) In December 201(cid:21), FS Japan Pro(cid:61)ect 12 GK ((cid:87)Ishikawa(cid:88)), our indirect wholly(cid:12)owned subsidiary and pro(cid:61)ect company, entered into a credit agreement (the (cid:87)Ishikawa Credit Agreement(cid:88)) with Mizuho Bank, Ltd. for aggregate borrowings up to (cid:84)2(cid:22).3 billion ((cid:4)233.9 million) for the development and construction of a 59 MWAC P(cid:48) solar power plant located in Ishikawa, Japan. The credit agreement consists of a (cid:84)24.0 billion ((cid:4)205.(cid:21) million) senior loan facility, a (cid:84)2.1 billion ((cid:4)1(cid:23).0 million) consumption tax facility, and a (cid:84)1.2 billion ((cid:4)10.3 million) letter of credit facility. In September 2020, we repaid the remaining (cid:4)215.5 million principal balance on the credit agreement prior to completing the sale of the pro(cid:61)ect. (cid:21)a(cid:50)a(cid:48) (cid:15)r(cid:39)(cid:38)(cid:43)(cid:54) Fa(cid:37)(cid:43)(cid:46)(cid:43)(cid:54)y In September 2015, First Solar Japan GK, our wholly(cid:12)owned subsidiary, entered into a construction loan facility with Mizuho Bank, Ltd. for borrowings up to (cid:84)4.0 billion ((cid:4)33.4 million) for the development and construction of utility(cid:12)scale P(cid:48) solar power plants in Japan (the (cid:87)Japan Credit Facility(cid:88)). Borrowings under the facility generally mature within 12 months following the completion of construction activities for each financed pro(cid:61)ect. The facility is guaranteed by First Solar, Inc. and secured by pledges of certain pro(cid:61)ects(cid:89) cash accounts and other rights in the pro(cid:61)ects. (cid:31)o(cid:37)(cid:42)(cid:43)(cid:41)(cid:43) (cid:15)r(cid:39)(cid:38)(cid:43)(cid:54) Fa(cid:37)(cid:43)(cid:46)(cid:43)(cid:54)y In June 201(cid:22), First Solar Japan GK, our wholly(cid:12)owned subsidiary, entered into a term loan facility with Mizuho Bank, Ltd. for borrowings up to (cid:84)(cid:22).0 billion ((cid:4)(cid:21)2.2 million) for the development of utility(cid:12)scale P(cid:48) solar power plants in Japan (the (cid:87)Tochigi Credit Facility(cid:88)). The term loan facility matures in March 2021. The facility is guaranteed by First Solar, Inc. and secured by pledges of certain of First Solar Japan GK(cid:89)s accounts. (cid:13)(cid:48)am(cid:43)(cid:60)u (cid:15)r(cid:39)(cid:38)(cid:43)(cid:54) (cid:13)(cid:41)r(cid:39)(cid:39)m(cid:39)(cid:48)(cid:54) In December 2019, FS Japan Pro(cid:61)ect 31 GK ((cid:87)Anamizu(cid:88)), our indirect wholly(cid:12)owned subsidiary and pro(cid:61)ect company, entered into a credit agreement (the (cid:87)Anamizu Credit Agreement(cid:88)) with MUFG Bank, Ltd.(cid:26) The Iyo Bank, Ltd.(cid:26) The Hachi(cid:61)uni Bank, Ltd.(cid:26) The Hyakugo Bank, Ltd.(cid:26) and The Yamagata Bank, Ltd. for aggregate borrowings up to (cid:84)(cid:22).(cid:22) billion ((cid:4)(cid:22)0.(cid:23) million) for the development and construction of a 1(cid:22) MWAC P(cid:48) solar power plant located in Ishikawa, Japan. The credit agreement consisted of a (cid:84)(cid:21).(cid:21) billion ((cid:4)(cid:21)1.0 million) term loan facility, a (cid:84)0.(cid:22) billion ((cid:4)(cid:21).5 million) consumption tax facility, and a (cid:84)0.4 billion ((cid:4)3.3 million) debt service reserve facility. In September 2020, we completed the sale of our Anamizu pro(cid:61)ect, and the outstanding balance of the Anamizu Credit Agreement of (cid:4)31.3 million was assumed by the customer. (cid:24)(cid:43)ya(cid:41)(cid:43) (cid:15)r(cid:39)(cid:38)(cid:43)(cid:54) Fa(cid:37)(cid:43)(cid:46)(cid:43)(cid:54)y In July 2020, GK Marumori Hatsudensho ((cid:87)Miyagi(cid:88)), our indirectly wholly(cid:12)owned subsidiary and pro(cid:61)ect company, entered into a credit agreement (the (cid:87)Miyagi Credit Facility(cid:88)) with Shinsei Bank, Ltd. for aggregate borrowings up to (cid:84)1(cid:22).2 billion ((cid:4)1(cid:21)4.2 million) for the development and construction of a 40 MWAC P(cid:48) solar power plant located in Miyagi, Japan. The credit facility consisted of a (cid:84)15.2 billion ((cid:4)145.1 million) term loan facility, a (cid:84)1.5 billion ((cid:4)14.4 million) consumption tax facility, and a (cid:84)0.5 billion ((cid:4)4.(cid:22) million) debt service reserve facility. In 120 September 2020, we completed the sale of our Miyagi pro(cid:61)ect, and the outstanding balance of the Miyagi Credit Facility of (cid:4)(cid:22)9.4 million was assumed by the customer. Kyo(cid:54)o (cid:15)r(cid:39)(cid:38)(cid:43)(cid:54) Fa(cid:37)(cid:43)(cid:46)(cid:43)(cid:54)y In July 2020, First Solar Japan GK, our wholly(cid:12)owned subsidiary, entered into a construction loan facility with Mizuho Bank, Ltd. for borrowings up to (cid:84)15.0 billion ((cid:4)142.(cid:23) million), which are intended to be used for the construction of a 3(cid:23) MWAC P(cid:48) solar power plant located in Kyoto, Japan (the (cid:87)Kyoto Credit Facility(cid:88)). Borrowings under the facility generally mature within 12 months following the completion of construction activities at the pro(cid:61)ect. The facility is guaranteed by First Solar, Inc. and First Solar Japan GK, our wholly(cid:12)owned subsidiary, and secured by pledges of the pro(cid:61)ect(cid:89)s cash accounts and certain other assets. (cid:13)(cid:48)a(cid:48)(cid:54)a(cid:50)ur (cid:15)r(cid:39)(cid:38)(cid:43)(cid:54) Fa(cid:37)(cid:43)(cid:46)(cid:43)(cid:54)y In March 201(cid:23), Anantapur Solar Parks Private Limited, our indirect wholly(cid:12)owned subsidiary and pro(cid:61)ect company, entered into a term loan facility (the (cid:87)Anantapur Credit Facility(cid:88)) with J.P. Morgan Securities India Private Limited for borrowings up to INR 1.2 billion ((cid:4)1(cid:23).4 million) for costs related to a 20 MWAC P(cid:48) solar power plant located in Karnataka, India. In July 2020, we completed the sale of our Anantapur pro(cid:61)ect, and the outstanding balance of the Anantapur Credit Facility of (cid:4)14.0 million was assumed by the customer. (cid:31)u(cid:48)(cid:41)a(cid:36)(cid:42)a(cid:38)ra (cid:15)r(cid:39)(cid:38)(cid:43)(cid:54) Fa(cid:37)(cid:43)(cid:46)(cid:43)(cid:54)y In March 201(cid:23), Tungabhadra Solar Parks Private Limited, our indirect wholly(cid:12)owned subsidiary and pro(cid:61)ect company, entered into a term loan facility (the (cid:87)Tungabhadra Credit Facility(cid:88)) with J.P. Morgan Securities India Private Limited for borrowings up to INR 1.0 billion ((cid:4)15.3 million) for costs related to a 20 MWAC P(cid:48) solar power plant located in Karnataka, India. In July 2020, we completed the sale of our Tungabhadra pro(cid:61)ect, and the outstanding balance of the Tungabhadra Credit Facility of (cid:4)12.0 million was assumed by the customer. (cid:33)ar(cid:43)a(cid:36)(cid:46)(cid:39) (cid:20)(cid:48)(cid:54)(cid:39)r(cid:39)(cid:53)(cid:54) (cid:29)a(cid:54)(cid:39) (cid:29)(cid:43)(cid:53)(cid:45) Certain of our long(cid:12)term debt agreements bear interest at prime, LIBOR, TIBOR, or equivalent variable rates. An increase in these variable rates would increase the cost of borrowing under our Revolving Credit Facility and certain pro(cid:61)ect specific debt financings. Our long(cid:12)term debt borrowing rates as of December 31, 2020 were as follows: L(cid:62)an Agree(cid:60)ent Revolving Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Luz del Norte Credit Facilities (1) . . . . . . . . . . . . . . . . . . . . . . . Japan Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tochigi Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Kyoto Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86) De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:13)(cid:11) 2.14(cid:5) Fixed rate loans at bank rate plus 3.50(cid:5) (cid:48)ariable rate loans at 91(cid:12)Day U.S. Treasury Bill Yield or LIBOR plus 3.50(cid:5) 1(cid:12)month TIBOR plus 0.55(cid:5) 3(cid:12)month TIBOR plus 1.00(cid:5) 1(cid:12)month TIBOR plus 0.(cid:21)0(cid:5) (1) Outstanding balance comprised of (cid:4)144.2 million of fixed rate loans and (cid:4)42.0 million of variable rate loans as of December 31, 2020. During the years ended December 31, 2020, 2019, and 201(cid:23), we paid (cid:4)14.9 million, (cid:4)1(cid:23).(cid:23) million, and (cid:4)1(cid:21).(cid:21) million, respectively, of interest related to our long(cid:12)term debt arrangements. 121 Fu(cid:54)ur(cid:39) (cid:27)r(cid:43)(cid:48)(cid:37)(cid:43)(cid:50)a(cid:46) (cid:27)aym(cid:39)(cid:48)(cid:54)(cid:53) At December 31, 2020, the future principal payments on our long(cid:12)term debt were due as follows (in thousands): 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total long(cid:12)term debt future principal payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) 41,(cid:23)01 1(cid:22),(cid:23)4(cid:23) (cid:21),0(cid:23)4 54,(cid:22)2(cid:22) (cid:22),5(cid:21)0 159,129 2(cid:23)(cid:22),149 T(cid:62)tal De(cid:49)t (cid:12)(cid:14). C(cid:62)(cid:60)(cid:60)it(cid:60)ent(cid:66) an(cid:51) C(cid:62)ntingen(cid:50)ie(cid:66) (cid:15)omm(cid:39)r(cid:37)(cid:43)a(cid:46) (cid:15)omm(cid:43)(cid:54)m(cid:39)(cid:48)(cid:54)(cid:53) During the normal course of business, we enter into commercial commitments in the form of letters of credit and surety bonds to provide financial and performance assurance to third parties. As of December 31, 2020, the ma(cid:61)ority of these commercial commitments supported our systems pro(cid:61)ects. As of December 31, 2020, the issued and outstanding amounts and available capacities under these commitments were as follows (in millions): Revolving Credit Facility (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bilateral facilities (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Surety bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86) I(cid:66)(cid:66)ue(cid:51) an(cid:51) Out(cid:66)tan(cid:51)ing (cid:4) 4.3 (cid:4) 135.5 (cid:21)(cid:22).0 A(cid:69)aila(cid:49)le Ca(cid:63)a(cid:50)it(cid:72) 395.(cid:22) 2(cid:22)0.5 (cid:21)49.9 (1) Our Revolving Credit Facility provides us with a sub(cid:12)limit of (cid:4)400.0 million to issue letters of credit, sub(cid:61)ect to certain additional limits depending on the currencies of the letters of credit, at a fee based on the applicable margin for Eurocurrency revolving loans and a fronting fee. (2) Of the total letters of credit issued under the bilateral facilities, (cid:4)1.2 million was secured with cash. (cid:27)ro(cid:38)u(cid:37)(cid:54) (cid:34)arra(cid:48)(cid:54)(cid:43)(cid:39)(cid:53) When we recognize revenue for module or system sales, we accrue liabilities for the estimated future costs of meeting our limited warranty obligations for both modules and the balance of the systems. We make and revise these estimates based primarily on the number of solar modules under warranty installed at customer locations, our historical experience with and pro(cid:61)ections of warranty claims, and our estimated per(cid:12)module replacement costs. We also monitor our expected future module performance through certain quality and reliability testing and actual performance in certain field installation sites. From time to time, we have taken remediation actions with respect to affected modules beyond our limited warranties and may elect to do so in the future, in which case we would incur additional expenses. Such potential voluntary future remediation actions beyond our limited warranty obligations may be material to our consolidated statements of operations if we commit to any such remediation actions. 122 Product warranty activities during the years ended December 31, 2020, 2019, and 201(cid:23) were as follows (in thousands): Product warranty liability, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . Accruals for new warranties issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in estimate of product warranty liability . . . . . . . . . . . . . . . . . . . . Product warranty liability, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current portion of warranty liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Noncurrent portion of warranty liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) (cid:4) (cid:4) (cid:13)(cid:11)(cid:13)(cid:11) 129,(cid:22)9(cid:22) (cid:4) 9,424 (22,4(cid:21)4) (21,(cid:21)(cid:21)1) 95,09(cid:21) (cid:4) 22,2(cid:22)(cid:23) (cid:4) (cid:22)2,(cid:23)1(cid:23) (cid:4) (cid:13)(cid:11)(cid:12)(cid:20) 220,(cid:21)92 (cid:4) 1(cid:22),32(cid:22) (22,540) ((cid:23)5,(cid:21)(cid:23)2) 129,(cid:22)9(cid:22) (cid:4) 20,291 (cid:4) 109,50(cid:21) (cid:4) (cid:13)(cid:11)(cid:12)(cid:19) 224,2(cid:22)4 14,132 (11,(cid:23)51) (5,(cid:23)(cid:21)3) 220,(cid:21)92 2(cid:22),(cid:21)5(cid:22) 193,035 We estimate our limited product warranty liability for power output and defects in materials and workmanship under normal use and service conditions based on return rates for each series of module technology. During the year ended December 31, 2020, we revised this estimate downward based on updated information regarding our warranty claims, which reduced our product warranty liability by (cid:4)19.(cid:22) million. This updated information reflected lower(cid:12) than(cid:12)expected settlements for our older series of module technology and revisions to pro(cid:61)ected settlements, resulting in a lower pro(cid:61)ected return rate. During the year ended December 31, 2019, we revised this estimate downward based on updated information regarding our warranty claims, which reduced our product warranty liability by (cid:4)(cid:23)0.0 million. This updated information reflected lower(cid:12)than(cid:12)expected return rates for our newer series of module technology, the evolving claims profile of each series, and certain changes to our warranty programs. In general, we expect the return rates for our newer series of module technology to be lower than our older series. We estimate that the return rate for such newer series of module technology will be less than 1(cid:5). As of December 31, 2020, a 1(cid:5) increase in the return rate across all series of module technology would increase our product warranty liability by (cid:4)104.9 million, and a 1(cid:5) increase in the return rate for BoS parts would not have a material impact on the associated warranty liability. (cid:27)(cid:39)r(cid:40)orma(cid:48)(cid:37)(cid:39) (cid:19)uara(cid:48)(cid:54)(cid:39)(cid:39)(cid:53) As part of our systems business, we conduct performance testing of a system prior to substantial completion to confirm the system meets its operational and capacity expectations noted in the EPC agreement. In addition, we may provide an energy performance test during the first or second year of a system(cid:89)s operation to demonstrate that the actual energy generation for the applicable period meets or exceeds the modeled energy expectation, after certain ad(cid:61)ustments. If there is an underperformance event with regard to these tests, we may incur liquidated damages as specified in the applicable EPC agreement. In certain instances, a bonus payment may be received at the end of the applicable test period if the system performs above a specified level. As of December 31, 2020 and 2019, we accrued (cid:4)10.2 million and (cid:4)4.(cid:21) million, respectively, for our estimated obligations under such arrangements, which were classified as (cid:87)Other current liabilities(cid:88) in our consolidated balance sheets. As part of our O(cid:6)M service offerings, we typically offer an effective availability guarantee, which stipulates that a system will be available to generate a certain percentage of total possible energy during a specific period after ad(cid:61)usting for factors outside our control as the service provider, such as weather, curtailment, outages, force ma(cid:61)eure, and other conditions that may affect system availability. Effective availability guarantees are only offered as part of our O(cid:6)M services and terminate at the end of an O(cid:6)M arrangement. If we fail to meet the contractual threshold for these guarantees, we may incur liquidated damages for certain lost energy. Our O(cid:6)M agreements typically contain provisions limiting our total potential losses under an agreement, including amounts paid for liquidated damages, to a percentage of O(cid:6)M fees. Many of our O(cid:6)M agreements also contain provisions whereby we may receive a bonus payment if system availability exceeds a separate threshold. As of December 31, 2020, we accrued (cid:4)0.9 million of liquidated damages under our effective availability guarantees, which was classified as (cid:87)Liabilities held for sale(cid:88) in our consolidated balance sheets. As of December 31, 2019, we accrued (cid:4)0.(cid:21) million of 123 liquidated damages under our effective availability guarantees, which was classified as (cid:87)Other current liabilities(cid:88) in our consolidated balance sheets. (cid:20)(cid:48)(cid:38)(cid:39)m(cid:48)(cid:43)(cid:40)(cid:43)(cid:37)a(cid:54)(cid:43)o(cid:48)(cid:53) In certain limited circumstances, we have provided indemnifications to customers, including pro(cid:61)ect tax equity investors, under which we are contractually obligated to compensate such parties for losses they suffer resulting from a breach of a representation, warranty, or covenant(cid:26) a reduction in tax benefits received, including investment tax credits(cid:26) or the resolution of specific matters associated with a pro(cid:61)ect(cid:89)s development or construction. Pro(cid:61)ect related tax benefits are, in part, based on guidance provided by the Internal Revenue Service and U.S. Treasury Department, which includes assumptions regarding the fair value of qualifying P(cid:48) solar power systems. For any sales contracts that have such indemnification provisions, we initially recognize a liability under ASC 4(cid:21)0 for the estimated premium that would be required by a guarantor to issue the same indemnity in a standalone arm(cid:89)s(cid:12)length transaction with an unrelated party. We typically base these estimates on the cost of insurance policies that cover the underlying risks being indemnified and may purchase such policies to mitigate our exposure to potential indemnification payments. We subsequently measure such liabilities at the greater of the initially estimated premium or the contingent liability required to be recognized under ASC 450. We recognize any indemnification liabilities as a reduction of revenue in the related transaction. After an indemnification liability is recorded, we derecognize such amount pursuant to ASC 4(cid:21)0(cid:12)10(cid:12)35(cid:12)2 depending on the nature of the indemnity, which derecognition typically occurs upon expiration or settlement of the arrangement, and any contingent aspects of the indemnity are accounted for in accordance with ASC 450. As of December 31, 2020 and 2019, we accrued (cid:4)3.2 million and (cid:4)0.(cid:23) million of current indemnification liabilities, respectively. As of December 31, 2019, we also accrued (cid:4)4.2 million of noncurrent indemnification liabilities. As of December 31, 2020, the maximum potential amount of future payments under our tax related and other indemnifications was (cid:4)1(cid:23)1.9 million, and we held insurance policies allowing us to recover up to (cid:4)43.(cid:23) million of potential amounts paid under the indemnifications covered by the policies. (cid:15)o(cid:48)(cid:54)(cid:43)(cid:48)(cid:41)(cid:39)(cid:48)(cid:54) (cid:15)o(cid:48)(cid:53)(cid:43)(cid:38)(cid:39)ra(cid:54)(cid:43)o(cid:48) We may seek to make additions to our advanced(cid:12)stage pro(cid:61)ect pipeline by actively developing our early(cid:12)to(cid:12)mid(cid:12) stage pro(cid:61)ect pipeline and by pursuing opportunities to acquire pro(cid:61)ects at various stages of development. In connection with such pro(cid:61)ect acquisitions, we may agree to pay additional amounts to pro(cid:61)ect sellers upon the achievement of certain milestones, such as obtaining a PPA, obtaining financing, or selling the pro(cid:61)ect to a new owner. We recognize a pro(cid:61)ect acquisition contingent liability when we determine that such a liability is both probable and reasonably estimable, and the carrying amount of the related pro(cid:61)ect asset is correspondingly increased. As of December 31, 2020 and 2019, we accrued (cid:4)2.2 million and (cid:4)2.4 million, respectively, for pro(cid:61)ect related contingent obligations, which was classified as (cid:87)Other current liabilities(cid:88) in our consolidated balance sheets. As of December 31, 2020 and 2019, we also accrued (cid:4)4.5 million for pro(cid:61)ect related contingent obligations, which was classified as (cid:87)Liabilities held for sale(cid:88) and (cid:87)Other liabilities,(cid:88) respectively, in our consolidated balance sheets. Any future differences between the acquisition(cid:12)date contingent obligation estimate and the ultimate settlement of the obligation are recognized as an ad(cid:61)ustment to the pro(cid:61)ect asset, as contingent payments are considered direct and incremental to the underlying value of the related pro(cid:61)ect. (cid:23)(cid:39)(cid:41)a(cid:46) (cid:27)ro(cid:37)(cid:39)(cid:39)(cid:38)(cid:43)(cid:48)(cid:41)(cid:53) C(cid:47)ass (cid:15)ction On March 15, 2012, a purported class action lawsuit titled Smilovits v. First Solar, Inc., et al., Case No. 2:12(cid:12) cv(cid:12)00555(cid:12)DGC, was filed in the Arizona District Court against the Company and certain of our current and former directors and officers. The complaint was filed on behalf of persons who purchased or otherwise acquired the Company(cid:89)s publicly traded securities between April 30, 200(cid:23) and February 2(cid:23), 2012. The complaint generally 124 alleged that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making false and misleading statements regarding the Company(cid:89)s financial performance and prospects. The action included claims for damages, including interest, and an award of reasonable costs and attorneys(cid:89) fees to the putative class. On July 23, 2012, the Arizona District Court issued an order appointing as lead plaintiffs in the Class Action the Mineworkers(cid:89) Pension Scheme and British Coal Staff Superannuation Scheme (collectively, the (cid:87)Pension Schemes(cid:88)). The Pension Schemes filed an amended complaint on August 1(cid:22), 2012, which contains similar allegations and seeks similar relief as the original complaint. Defendants filed a motion to dismiss on September 14, 2012. On December 1(cid:22), 2012, the court denied defendants(cid:89) motion to dismiss. On October (cid:23), 2013, the Arizona District Court granted the Pension Schemes(cid:89) motion for class certification and certified a class comprised of all persons who purchased or otherwise acquired publicly traded securities of the Company between April 30, 200(cid:23) and February 2(cid:23), 2012 and were damaged thereby, excluding defendants and certain related parties. Merits discovery closed on February 2(cid:22), 2015. Defendants filed a motion for summary (cid:61)udgment on March 2(cid:22), 2015. On August 11, 2015, the Arizona District Court granted defendants(cid:89) motion in part and denied it in part, and certified an issue for immediate appeal to the Ninth Circuit Court of Appeals (the (cid:87)Ninth Circuit(cid:88)). First Solar filed a petition for interlocutory appeal with the Ninth Circuit, and that petition was granted on November 1(cid:23), 2015. On May 20, 201(cid:21), the Pension Schemes moved to vacate the order granting the petition, dismiss the appeal, and stay the merits briefing schedule. On December 13, 201(cid:21), the Ninth Circuit denied the Pension Schemes(cid:89) motion. On January 31, 201(cid:23), the Ninth Circuit issued an opinion affirming the Arizona District Court(cid:89)s order denying in part defendants(cid:89) motion for summary (cid:61)udgment. On March 1(cid:21), 201(cid:23), First Solar filed a petition for panel rehearing or rehearing en banc with the Ninth Circuit. On May (cid:22), 201(cid:23), the Ninth Circuit denied defendants(cid:89) petition. On August (cid:21), 201(cid:23), defendants filed a petition for writ of certiorari to the U.S. Supreme Court. Meanwhile, in the Arizona District Court, expert discovery was completed on February 5, 2019. On June 24, 2019, the U.S. Supreme Court denied the petition. Following the denial of the petition, the Arizona District Court ordered that the trial begin on January (cid:22), 2020. On January 5, 2020, First Solar entered into an MOU to settle the Class Action. First Solar agreed to pay a total of (cid:4)350 million to settle the claims in the Class Action brought on behalf of all persons who purchased or otherwise acquired the Company(cid:89)s shares between April 30, 200(cid:23) and February 2(cid:23), 2012, in exchange for mutual releases and a dismissal with pre(cid:61)udice of the complaint upon court approval of the settlement. The settlement contained no admission of liability, wrongdoing, or responsibility by any of the parties. As a result of the entry into the MOU, we accrued a loss for the above(cid:12)referenced settlement in our results of operations for the year ended December 31, 2019. On January 24, 2020, First Solar paid (cid:4)350 million to the settlement escrow agent. On February 13, 2020, First Solar entered into a stipulation of settlement with certain named plaintiffs on terms and conditions that are consistent with the MOU. On February 14, 2020, the lead plaintiffs filed a motion for preliminary approval of the settlement. Following a February 2(cid:22), 2020 hearing, the Arizona District Court entered an order on March 2, 2020 that granted preliminary approval of the settlement and permitted notice to the class. Following a June 30, 2020 hearing, the Arizona District Court entered an order on June 30, 2020 that granted final approval of the settlement and dismissed the Class Action with pre(cid:61)udice. (cid:28)pt(cid:6)(cid:28)ut (cid:15)ction On June 23, 2015, a suit titled Maverick Fund, L.D.C. v. First Solar, Inc., et al., Case No. 2:15(cid:12)cv(cid:12)0115(cid:21)(cid:12)ROS, was filed in Arizona District Court by putative stockholders that opted out of the Class Action. The complaint names the Company and certain of our current and former directors and officers as defendants, and alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and violated state law, by making false and misleading statements regarding the Company(cid:89)s financial performance and prospects. The action includes claims for rescissory and actual damages, interest, punitive damages, and an award of reasonable attorneys(cid:89) fees, expert fees, and costs. 125 First Solar and the individual defendants filed a motion to dismiss the Opt(cid:12)Out Action on July 1(cid:21), 201(cid:23). On November 2(cid:22), 201(cid:23), the Court granted defendants(cid:89) motion to dismiss the plaintiffs(cid:89) negligent misrepresentation claim under state law, but otherwise denied defendants(cid:89) motion. On June 3, 2020, First Solar and the plaintiffs in the Opt(cid:12)Out Action entered into an agreement in principle to settle the claims in the Opt(cid:12)Out Action. On July 1(cid:22), 2020, the parties executed a definitive settlement agreement pursuant to which First Solar agreed to pay a total of (cid:4)19 million in exchange for mutual releases and a dismissal with pre(cid:61)udice of the Opt(cid:12)Out Action. The agreement contains no admission of liability, wrongdoing, or responsibility by any of the defendants. On July 30, 2020, First Solar funded the settlement, and on July 31, 2020, the parties filed a (cid:61)oint stipulation of dismissal. On September 10, 2020, the Arizona District Court entered an order dismissing the case with pre(cid:61)udice. As of December 31, 2019, we accrued (cid:4)13 million of estimated losses for this action. As a result of the settlement, we accrued an incremental (cid:4)(cid:21) million litigation loss during the year ended December 31, 2020. (cid:18)eri(cid:57)ati(cid:57)e (cid:15)ctions On July 1(cid:21), 2013, a derivative complaint was filed in the Superior Court of Arizona, Maricopa County, formerly titled Bargar, et al. v. Ahearn, et al., and now titled Kaufold v. Ahearn, et. al., Case No. C(cid:48)2013(cid:12)00993(cid:23), by a putative stockholder against certain current and former directors and officers of the Company ((cid:87)Kaufold(cid:88)). The complaint generally alleges that the defendants caused or allowed false and misleading statements to be made concerning the Company(cid:89)s financial performance and prospects. The action includes claims for, among other things, breach of fiduciary duties, insider trading, un(cid:61)ust enrichment, and waste of corporate assets. By court order on October 3, 2013, the Superior Court of Arizona, Maricopa County granted the parties(cid:89) stipulation to defer defendants(cid:89) response to the complaint pending resolution of the Class Action or expiration of a stay issued in certain consolidated derivative actions in the Arizona District Court. On November 5, 2013, the matter was placed on the court(cid:89)s inactive calendar. The parties (cid:61)ointly sought and obtained multiple requests to continue the stay in this action. On June 30, 2020, the parties (cid:61)ointly requested that the stay be lifted. On July 1, 2020, the Superior Court of Arizona, Maricopa County ordered that the stay be lifted. On July 14, 2020, defendants filed a motion to dismiss the complaint with pre(cid:61)udice. On September 14, 2020, First Solar and the plaintiff entered into an agreement in principle to settle the claims in the Kaufold action, providing for, among other things, payment of the plaintiff(cid:89)s attorney(cid:89)s fees in an immaterial sum. On October 2(cid:23), 2020 the parties executed a Stipulation and Agreement of Settlement on terms and conditions that are consistent with the September 14, 2020 agreement in principle. The stipulation contains no admission of liability, wrongdoing, or responsibility by any of the defendants. On October 30, 2020, the plaintiff filed a motion for preliminary approval of the settlement, and on November (cid:21), 2020, the court entered an order that granted preliminary approval of the settlement and permitted notice. Following a December 1, 2020 hearing, the court entered a Final Order and Judgment that granted final approval of the settlement and dismissed the case with pre(cid:61)udice. (cid:28)ther (cid:26)atters and C(cid:47)aims We are party to other legal matters and claims in the normal course of our operations. While we believe the ultimate outcome of such other matters and claims will not have a material adverse effect on our financial position, results of operations, or cash flows, the outcome of such matters and claims is not determinable with certainty, and negative outcomes may adversely affect us. 12(cid:21) (cid:12)(cid:15). Re(cid:69)enue (cid:53)r(cid:62)(cid:60) C(cid:62)ntra(cid:50)t(cid:66) (cid:70)it(cid:55) Cu(cid:66)t(cid:62)(cid:60)er(cid:66) The following table presents the disaggregation of revenue from contracts with customers for the years ended December 31, 2020, 2019, and 201(cid:23) along with the reportable segment for each category (in thousands): Categ(cid:62)r(cid:72) Solar modules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Solar power systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . O(cid:6)M services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Energy generation (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EPC services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Seg(cid:60)ent Modules Systems Systems Systems Systems (cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86) (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:4) 1,(cid:22)3(cid:21),0(cid:21)0 (cid:4) 1,4(cid:21)0,11(cid:21) (cid:4) (cid:13)(cid:11)(cid:12)(cid:19) 502,001 1,244,1(cid:22)5 103,1(cid:23)(cid:21) 4(cid:22),122 34(cid:22),5(cid:21)0 (cid:4) 2,(cid:22)11,332 (cid:4) 3,0(cid:21)3,11(cid:22) (cid:4) 2,244,044 1,14(cid:23),(cid:23)5(cid:21) 10(cid:22),(cid:22)05 54,539 291,901 (cid:22)94,(cid:22)9(cid:22) 115,590 (cid:21)1,94(cid:23) 2,93(cid:22) (1) During the year ended December 31, 2020, the ma(cid:61)ority of energy generated and sold by our P(cid:48) solar power systems was accounted for under ASC (cid:23)40 consistent with the classification of the associated PPAs. We recognize revenue for module sales at a point in time following the transfer of control of the modules to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. Such contracts may contain provisions that require us to make liquidated damage payments to the customer if we fail to ship or deliver modules by scheduled dates. We recognize these liquidated damages as a reduction of revenue in the period we transfer control of the modules to the customer. For EPC services, or sales of solar power systems with EPC services, we recognize revenue over time using cost based input methods, in which significant (cid:61)udgment is required to evaluate assumptions including the amount of net contract revenues and the total estimated costs to determine our progress toward contract completion. If the estimated total costs on any contract are greater than the net contract revenues, we recognize the entire estimated loss in the period the loss becomes known. The cumulative effect of revisions to estimates related to net contract revenues or costs to complete contracts are recorded in the period in which the revisions to estimates are identified and the amounts can be reasonably estimated. Changes in estimates for sales of systems and EPC services occur for a variety of reasons, including but not limited to (i) construction plan accelerations or delays, (ii) module cost forecast changes, (iii) cost related change orders, or (iv) changes in other information used to estimate costs. Changes in estimates may have a material effect on our consolidated statements of operations. 12(cid:22) The following table outlines the impact on revenue of net changes in estimated transaction prices and input costs for systems related sales contracts (both increases and decreases) for the years ended December 31, 2020, 2019, and 201(cid:23) as well as the number of pro(cid:61)ects that comprise such changes. For purposes of the table, we only include pro(cid:61)ects with changes in estimates that have a net impact on revenue of at least (cid:4)1.0 million during the periods presented with the exception of the sales and use tax matter described below, for which the aggregate change in estimate has been presented. Also included in the table is the net change in estimate as a percentage of the aggregate revenue for such pro(cid:61)ects. Number of pro(cid:61)ects (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) 9 3 (cid:13)(cid:11)(cid:12)(cid:19) 24 (Decrease) increase in revenue from net changes in transaction prices (in thousands) (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase (decrease) in revenue from net changes in input cost estimates (in thousands) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net (decrease) increase in revenue from net changes in estimates (in (cid:4) (1(cid:21),954) (cid:4) (3,(cid:21)42) (cid:4) (cid:21)3,3(cid:21)1 (cid:22),4(cid:23)(cid:22) (23,103) 1,54(cid:23) thousands) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (9,4(cid:21)(cid:22)) (cid:4) (2(cid:21),(cid:22)45) (cid:4) (cid:21)4,909 Net change in estimate as a percentage of aggregate revenue . . . . . . . . . . . . . . (0.5) (cid:5) (4.(cid:21)) (cid:5) 0.(cid:21) (cid:5) (cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86) (1) During the year ended December 31, 201(cid:23), we settled a tax examination with the state of California regarding several matters, including certain sales and use tax payments due under lump sum EPC contracts. Accordingly, we revised our estimates of sales and use taxes due for pro(cid:61)ects in the state of California, which affected the estimated transaction prices for such contracts, and recorded an increase to revenue of (cid:4)54.(cid:21) million. The following table reflects the changes in our contract assets, which we classify as (cid:87)Accounts receivable, unbilled(cid:88) or (cid:87)Retainage,(cid:88) and our contract liabilities, which we classify as (cid:87)Deferred revenue,(cid:88) for the year ended December 31, 2020, excluding any assets or liabilities classified as held for sale as of December 31, 2020 (in thousands): Accounts receivable, unbilled (1) . . . . . . . . . . . . . . . . . . . . . . Retainage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Allowance for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable, unbilled and retainage, net . . . . . . . . . . . (cid:4) (cid:4) (cid:13)(cid:11)(cid:13)(cid:11) 49,395 (cid:4) (cid:86) (303) 49,092 (cid:4) (cid:13)(cid:11)(cid:12)(cid:20) 1(cid:21)2,05(cid:22) 21,41(cid:21) (cid:86) 1(cid:23)3,4(cid:22)3 (cid:4) C(cid:55)ange (134,3(cid:23)1) ((cid:22)3) (cid:5) Deferred revenue (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) 233,(cid:22)32 (cid:4) 394,(cid:21)55 (cid:4) (1(cid:21)0,923) (41) (cid:5) (cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86) (1) (2) Includes (cid:4)22.(cid:22) million of noncurrent accounts receivable, unbilled classified as (cid:87)Other assets(cid:88) on our consolidated balance sheet as of December 31, 2020. Includes (cid:4)44.9 million and (cid:4)(cid:22)1.4 million of noncurrent deferred revenue classified as (cid:87)Other liabilities(cid:88) on our consolidated balance sheets as of December 31, 2020 and 2019, respectively. During the year ended December 31, 2020, our contract assets decreased by (cid:4)134.4 million primarily due to billings associated with ongoing construction activities at the GA Solar 4, Sun Streams, and Sunshine (cid:48)alley pro(cid:61)ects, partially offset by unbilled receivables associated with the sale of certain systems pro(cid:61)ects. During the year ended December 31, 2020, our contract liabilities decreased by (cid:4)1(cid:21)0.9 million primarily due to the recognition of revenue for sales of solar modules for which payment was received in 2019 prior to the step down in the U.S. investment tax credit from 30(cid:5) to 2(cid:21)(cid:5), partially offset by advance payments received for sales of solar modules in the current period. During the years ended December 31, 2020 and 2019, we recognized revenue of (cid:4)31(cid:21).1 million and (cid:4)11(cid:22).(cid:22) million, respectively, that was included in the corresponding contract liability balance at the beginning of the periods. 12(cid:23) As of December 31, 2020, we had entered into contracts with customers for the future sale of 10.(cid:22) GWDC of solar modules for an aggregate transaction price of (cid:4)3.3 billion. We expect to recognize such amounts as revenue through 2023 as we transfer control of the modules to the customers. While our contracts with customers typically represent firm purchase commitments, these contracts may be sub(cid:61)ect to amendments made by us or requested by our customers. These amendments may increase or decrease the volume of modules to be sold under the contract, change delivery schedules, or otherwise ad(cid:61)ust these contracts. As of December 31, 2020, we had entered into O(cid:6)M contracts covering approximately 900 MWDC of utility(cid:12)scale P(cid:48) solar power systems, excluding contracts expected to be transferred to Clairvest in connection with the sale of our North American O(cid:6)M operations. See Note (cid:22). (cid:87)Consolidated Balance Sheet Details(cid:88) to our consolidated financial statements for further information. We expect to recognize (cid:4)14(cid:21).0 million of revenue during the noncancelable term of these O(cid:6)M contracts over a weighted(cid:12)average period of 1(cid:23).3 years. the expected revenue under (cid:12)(cid:16). St(cid:62)(cid:50)(cid:58)(cid:55)(cid:62)l(cid:51)er(cid:66)(cid:74) E(cid:64)uit(cid:72) (cid:27)r(cid:39)(cid:40)(cid:39)rr(cid:39)(cid:38) S(cid:54)o(cid:37)(cid:45) As of December 31, 2020 and 2019, we had authorized 30,000,000 shares of undesignated preferred stock, (cid:4)0.001 par value, none of which was issued and outstanding. Our board of directors is authorized to determine the rights, preferences, and restrictions on any series of preferred stock that we may issue. (cid:15)ommo(cid:48) S(cid:54)o(cid:37)(cid:45) As of December 31, 2020 and 2019, we had authorized 500,000,000 shares of common stock, (cid:4)0.001 par value, of which 105,9(cid:23)0,4(cid:21)(cid:21) and 105,44(cid:23),921 shares, respectively, were issued and outstanding. Each share of common stock is entitled to a single vote. We have not declared or paid any dividends through December 31, 2020. (cid:12)(cid:17). S(cid:55)are(cid:8)(cid:24)a(cid:66)e(cid:51) C(cid:62)(cid:60)(cid:63)en(cid:66)ati(cid:62)n The following table presents share(cid:12)based compensation expense recognized in our consolidated statements of operations for the years ended December 31, 2020, 2019, and 201(cid:23) (in thousands): Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Production start(cid:12)up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total share(cid:12)based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) 3,1(cid:23)3 (cid:4) 22,093 3,991 (cid:86) 29,2(cid:21)(cid:22) (cid:4) (cid:22),541 (cid:4) 23,(cid:22)41 5,91(cid:22) 230 3(cid:22),429 (cid:4) (cid:21),422 21,(cid:21)4(cid:21) 5,(cid:22)14 3(cid:22)2 34,154 (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:19) Share(cid:12)based compensation expense capitalized in inventory, pro(cid:61)ect assets, and P(cid:48) solar power systems was (cid:4)1.1 million and (cid:4)1.2 million as of December 31, 2020 and 2019, respectively. As of December 31, 2020, we had (cid:4)2(cid:23).(cid:21) million of unrecognized share(cid:12)based compensation expense related to unvested restricted and performance stock units, which we expect to recognize over a weighted(cid:12)average period of approximately 1.3 years. During the years ended December 31, 2020, 2019, and 201(cid:23), we recognized an income tax benefit in our statement of operations of (cid:4)(cid:22).3 million, (cid:4)9.(cid:21) million, and (cid:4)9.9 million, respectively, related to share(cid:12)based compensation expense, including excess tax benefits. We authorize our transfer agent to issue new shares, net of shares withheld for taxes as appropriate, for the vesting of restricted and performance stock units or grants of unrestricted stock. 129 S(cid:42)ar(cid:39)-(cid:14)a(cid:53)(cid:39)(cid:38) (cid:15)om(cid:50)(cid:39)(cid:48)(cid:53)a(cid:54)(cid:43)o(cid:48) (cid:27)(cid:46)a(cid:48)(cid:53) During the year ended December 31, 2015, we adopted our 2015 Omnibus Incentive Compensation Plan ((cid:87)the 2015 Omnibus Plan(cid:88)), under which directors, officers, employees, and consultants of First Solar (including any of its subsidiaries) are eligible to participate in various forms of share(cid:12)based compensation. The 2015 Omnibus Plan was administered by the compensation committee (or any other committee designated by our board of directors), which is authorized to, among other things, determine the recipients of grants, the exercise price, and the vesting schedule of any awards made under the 2015 Omnibus Plan. The 2015 Omnibus Plan provided for the grant of incentive stock options, non(cid:12)qualified stock options, stock appreciation rights, restricted shares, restricted stock units, performance units, cash incentive awards, performance compensation awards, and other equity(cid:12)based and equity(cid:12)related awards. During the year ended December 31, 2020, the 2015 Omnibus Plan was replaced by our 2020 Omnibus Plan. Upon approval by our shareholders, the 2015 Omnibus Plan share reserve was transferred to the 2020 Omnibus Plan and any forfeitures under the 2015 Omnibus Plan became available for grant under the 2020 Omnibus Plan. This new plan differs from the 2015 Omnibus Plan in that the 2020 Omnibus Plan (i) continues to permit performance(cid:12)based awards despite the elimination of performance(cid:12)based awards under Section 1(cid:21)2(m) of the Internal Revenue Code of 19(cid:23)(cid:21), as amended, (ii) alters the number of, and manner in which we calculate the 2020 Omnibus Plan share reserve (A) to count dividend equivalents paid in stock against the applicable share reserve and (B) to count shares tendered in payment of all awards or withheld by the Company to satisfy any tax withholding obligation against the applicable share reserve, (iii) prohibits payment of dividends or dividend equivalents before the underlying awards vest, (iv) clarifies the method of tax withholding, and (v) responds to other compensation and governance trends. Under the 2020 Omnibus Plan, directors, officers, employees, and consultants of First Solar, Inc. (including any of its affiliates) are eligible to participate. The 2020 Omnibus Plan is administered by the compensation committee (or any other committee designated by our board of directors), which is authorized to, among other things, determine the recipients of grants, the exercise price, and vesting schedule of any awards made under the 2020 Omnibus Plan. Our board of directors may amend, modify, or terminate the 2020 Omnibus Plan without the approval of our stockholders, except for amendments that would increase the maximum number of shares of our common stock available for awards under the 2020 Omnibus Plan, increase the maximum number of shares of our common stock that may be delivered by incentive stock options, or modify the requirements for participation in the 2020 Omnibus Plan. The 2020 Omnibus Plan provides for the grant of incentive stock options, non(cid:12)qualified stock options, stock appreciation rights, restricted shares, restricted stock units, performance units, cash incentive awards, performance compensation awards, and other equity(cid:12)based and equity(cid:12)related awards. Excluding the share reserve transferred from the 2015 Omnibus Plan, the maximum number of new shares of our common stock that may be delivered by awards granted under the 2020 Omnibus Plan is 4,000,000. In addition, the shares underlying any forfeited, expired, terminated, or canceled awards, or shares surrendered as payment for taxes required to be withheld, become available for new award grants. We may not grant awards under the 2020 Omnibus Plan after 2030, which is the tenth anniversary of the 2020 Omnibus Plan(cid:89)s approval by our stockholders. As of December 31, 2020, we had (cid:21),(cid:21)0(cid:23),(cid:23)(cid:22)(cid:22) shares available for future issuance under the 2020 Omnibus Plan. (cid:29)(cid:39)(cid:53)(cid:54)r(cid:43)(cid:37)(cid:54)(cid:39)(cid:38) a(cid:48)(cid:38) (cid:27)(cid:39)r(cid:40)orma(cid:48)(cid:37)(cid:39) S(cid:54)o(cid:37)(cid:45) (cid:32)(cid:48)(cid:43)(cid:54)(cid:53) We issue shares to the holders of restricted stock units on the date the restricted units vest. The ma(cid:61)ority of shares issued are net of applicable withholding taxes, which we pay on behalf of our associates. As a result, the actual number of shares issued will be less than the number of restricted stock units granted. Prior to vesting, restricted stock units do not have dividend equivalent rights or voting rights, and the shares underlying the restricted stock units are not considered issued and outstanding. In February 201(cid:22), the compensation committee approved a long(cid:12)term incentive program for key executive officers and associates. The program is intended to incentivize retention of our key executive talent, provide a smooth 130 transition from our former key senior talent equity performance program, and align the interests of executive management and stockholders. Specifically, the program consists of (i) performance stock units to be earned over an approximately three(cid:12)year performance period, which ended in December 2019 and (ii) stub(cid:12)year grants of separate performance stock units to be earned over an approximately two(cid:12)year performance period, which ended in December 201(cid:23). In February 2019, the compensation committee certified the achievement of the maximum vesting conditions applicable for the stub(cid:12)year grants. Accordingly, each participant received one share of common stock for each vested performance unit, net of any tax withholdings. In February 2020, the compensation committee certified the achievement of the threshold vesting conditions applicable to the remaining 201(cid:22) grants of performance stock units. Accordingly, each participant received one share of common stock for each vested performance unit granted in February 201(cid:22), net of any tax withholdings. In April 201(cid:23), in continuation of our long(cid:12)term incentive program for key executive officers and associates, the compensation committee approved additional grants of performance stock units to be earned over an approximately three(cid:12)year performance period ending in December 2020. (cid:48)esting of the 201(cid:23) grants of performance stock units is contingent upon the relative attainment of target gross margin, operating expense, and contracted revenue metrics, to be certified by the compensation committee. In July 2019, the compensation committee approved additional grants of performance stock units for key executive officers. Such grants are expected to be earned over a multi(cid:12)year performance period ending in December 2021. (cid:48)esting of the 2019 grants of performance stock units is contingent upon the relative attainment of target cost per watt, module wattage, gross profit, and operating income metrics. In March 2020, the compensation committee approved additional grants of performance stock units for key executive officers. Such grants are expected to be earned over a multi(cid:12)year performance period ending in December 2022. (cid:48)esting of the 2020 grants of performance stock units is contingent upon the relative attainment of contracted revenue, module wattage, and return on capital metrics. (cid:48)esting of performance stock units is also contingent upon the employment of program participants through the applicable vesting dates, with limited exceptions in case of death, disability, a qualifying retirement, or a change(cid:12)in(cid:12) control of First Solar. Outstanding performance stock units are included in the computation of diluted net income per share for the years ended December 31, 2020, 2019, and 201(cid:23) based on the number of shares that would be issuable if the end of the reporting period were the end of the contingency period. The following is a summary of our restricted stock unit activity, including performance stock unit activity, for the year ended December 31, 2020: Unvested restricted stock units at December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restricted stock units granted (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restricted stock units vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restricted stock units forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unvested restricted stock units at December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86) Nu(cid:60)(cid:49)er (cid:62)(cid:53) S(cid:55)are(cid:66) 2,411,43(cid:21) (cid:23)0(cid:23),(cid:23)34 ((cid:22)51,354) ((cid:21)1(cid:21),(cid:21)(cid:21)0) 1,(cid:23)52,25(cid:21) (cid:45)eig(cid:55)te(cid:51)(cid:8) A(cid:69)erage Grant(cid:8)Date Fair (cid:44)alue (cid:4) (cid:4) 50.13 45.01 43.(cid:23)0 43.9(cid:21) 52.52 (1) Restricted stock units granted include the maximum amount of performance stock units available for issuance under our long(cid:12)term incentive program for key executive officers and associates. The actual number of shares to be issued will depend on the relative attainment of the performance metrics described above. We estimate the fair value of our restricted stock unit awards based on our stock price on the grant date. For the years ended December 31, 2019 and 201(cid:23), the weighted(cid:12)average grant(cid:12)date fair value for restricted stock units 131 granted in such years was (cid:4)5(cid:21).4(cid:22) and (cid:4)(cid:21)(cid:22).44, respectively. The total fair value of restricted stock units vested during 2020, 2019, and 201(cid:23) was (cid:4)32.9 million, (cid:4)40.(cid:23) million, and (cid:4)32.2 million, respectively. (cid:32)(cid:48)r(cid:39)(cid:53)(cid:54)r(cid:43)(cid:37)(cid:54)(cid:39)(cid:38) S(cid:54)o(cid:37)(cid:45) During the years ended December 31, 2020, 2019, and 201(cid:23), we awarded 2(cid:22),(cid:22)31(cid:26) 2(cid:21),254(cid:26) and 31,190, respectively, of fully vested, unrestricted shares of our common stock to the independent members of our board of directors. Accordingly, we recognized (cid:4)1.5 million, (cid:4)1.5 million, and (cid:4)1.(cid:21) million of share(cid:12)based compensation expense for these awards during the years ended December 31, 2020, 2019, and 201(cid:23), respectively. S(cid:54)o(cid:37)(cid:45) (cid:27)ur(cid:37)(cid:42)a(cid:53)(cid:39) (cid:27)(cid:46)a(cid:48) Our shareholders approved our stock purchase plan for employees in June 2010. The plan allowed employees to purchase our common stock through payroll withholdings over a six(cid:12)month offering period at a discount from the closing share price on the last day of the offering period. In April 201(cid:22), we amended our stock purchase plan to reduce the purchase discount from 15(cid:5) to 4(cid:5). Accordingly, the plan was considered noncompensatory and no longer resulted in the recognition of share(cid:12)based compensation expense. Effective as of May 14, 2020, the stock purchase plan was terminated. Accordingly, and because no future issuances of the Company(cid:89)s common stock will occur under the plan, the Company deregistered all unissued shares of the Company(cid:89)s common stock formerly registered for issuance. (cid:12)(cid:18). In(cid:50)(cid:62)(cid:60)e Ta(cid:71)e(cid:66) On March 2(cid:22), 2020, the CARES Act was signed into law. The CARES Act includes a number of federal corporate tax relief provisions that are intended to support the ongoing liquidity of U.S. corporations. Among other provisions, the CARES Act allows net operating losses incurred in 201(cid:23), 2019, and 2020 to be carried back to each of the five preceding taxable years. As a result of the CARES Act, we expect to carry back our 2019 and 2020 net operating losses to our 201(cid:21) U.S. corporate income tax return, which restores certain foreign tax credits we expect to utilize by amending our 201(cid:22) and 201(cid:23) U.S. corporate income tax returns. Such amended returns restore other general business credits we expect to utilize in future tax years before the credits expire and eliminate the transition tax liability for accumulated earnings of foreign subsidiaries resulting from the Tax Act. As a result, we recorded a tax benefit of (cid:4)(cid:23)9.(cid:22) million for the year ended December 31, 2020, which represents the one(cid:12)time income tax benefit for the difference between the statutory federal corporate income tax rate of 35(cid:5) applicable to our 201(cid:21) U.S. corporate income tax return and the current federal corporate income tax rate of 21(cid:5). Any changes to the estimate will be recorded in the period the carry back claims are filed. Although we continue to evaluate our plans for the reinvestment or repatriation of unremitted foreign earnings, we expect to indefinitely reinvest the earnings of our foreign subsidiaries to fund our international operations, with the exception of certain subsidiaries for which applicable taxes have been recorded as of December 31, 2020. Accordingly, we have not recorded any provision for additional U.S. or foreign withholding taxes related to the outside basis differences of our foreign subsidiaries in which we expect to indefinitely reinvest their earnings. The U.S. and non(cid:12)U.S. components of our income or loss before income taxes for the years ended December 31, 2020, 2019, and 201(cid:23) were as follows (in thousands): U.S. income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non(cid:12)U.S. income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income (loss) before taxes and equity in earnings . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) 22,4(cid:22)5 (cid:4) 2(cid:22)0,(cid:22)15 293,190 (cid:4) (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (239,54(cid:22)) (cid:4) 119,41(cid:23) (120,129) (cid:4) (cid:13)(cid:11)(cid:12)(cid:19) (49,353) 1(cid:21)2,500 113,14(cid:22) 132 The components of our income tax expense or benefit for the years ended December 31, 2020, 2019, and 201(cid:23) were as follows (in thousands): (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:19) Current (benefit) expense: Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total current (benefit) expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred expense (benefit): Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total deferred expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total income tax (benefit) expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) (149,1(cid:21)2) (cid:4) 4,02(cid:22) 2(cid:21),303 (11(cid:23),(cid:23)32) 12,(cid:21)(cid:23)1 (cid:22),591 ((cid:23),(cid:22)34) 11,53(cid:23) (10(cid:22),294) (cid:4) 9,9(cid:21)1 (cid:4) 3,(cid:23)90 41,0(cid:23)0 54,931 (44,2(cid:21)(cid:22)) (13,5(cid:21)(cid:23)) (cid:23),(cid:22)(cid:23)(cid:23) (49,04(cid:22)) (55,(cid:21)4(cid:22)) ((cid:21),(cid:22)3(cid:22)) 1,9(cid:22)3 ((cid:21)0,411) (5,4(cid:23)0) (cid:4) 31,530 2,3(cid:23)(cid:22) 1(cid:23),5(cid:22)1 52,4(cid:23)(cid:23) 3,441 Our Malaysian subsidiary has been granted a long(cid:12)term tax holiday that expires in 202(cid:22). The tax holiday, which generally provides for a full exemption from Malaysian income tax, is conditional upon our continued compliance with meeting certain employment and investment thresholds, which we are currently in compliance with and expect to continue to comply with through the expiration of the tax holiday in 202(cid:22). In addition, our (cid:48)ietnamese subsidiary has been granted a tax incentive that provides a two(cid:12)year tax exemption, beginning in 2020, and reduced tax rates through the end of 2025. Our income tax results differed from the amount computed by applying the relevant U.S. statutory federal corporate income tax rate to our income or loss before income taxes for the following reasons for the years ended December 31, 2020, 2019, and 201(cid:23) (in thousands): (cid:13)(cid:11)(cid:13)(cid:11) Ta(cid:71) (cid:38)er(cid:50)ent Statutory income tax expense (benefit) . . Effect of CARES Act . . . . . . . . . . . . . . . . Change in tax contingency . . . . . . . . . . . . Changes in valuation allowance . . . . . . . . Effect of tax holiday . . . . . . . . . . . . . . . . . Tax credits . . . . . . . . . . . . . . . . . . . . . . . . Share(cid:12)based compensation . . . . . . . . . . . . Return to provision ad(cid:61)ustments . . . . . . . Foreign dividend income . . . . . . . . . . . . . Non(cid:12)deductible expenses . . . . . . . . . . . . . Foreign tax rate differential . . . . . . . . . . . State tax, net of federal benefit . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reported income tax (benefit) expense . . (cid:4) (cid:4) (cid:21)1,5(cid:22)0 ((cid:23)9,(cid:21)99) (59,010) (31,(cid:21)(cid:22)1) (11,500) ((cid:23),091) ((cid:22)20) 2,414 3,004 3,(cid:23)34 (cid:21),135 11,059 5,3(cid:23)1 (10(cid:22),294) 21.0 (cid:5) (cid:4) (30.(cid:21)) (cid:5) (20.1) (cid:5) (10.(cid:23)) (cid:5) (3.9) (cid:5) (2.(cid:23)) (cid:5) (0.2) (cid:5) 0.(cid:23) (cid:5) 1.0 (cid:5) 1.3 (cid:5) 2.1 (cid:5) 3.(cid:23) (cid:5) 1.(cid:23) (cid:5) (3(cid:21).(cid:21)) (cid:5) (cid:4) (cid:13)(cid:11)(cid:12)(cid:20) Ta(cid:71) (25,22(cid:22)) (cid:86) (cid:22),09(cid:21) (5,(cid:22)35) (2(cid:21),(cid:23)34) (1,99(cid:21)) (1,594) 14,3(cid:21)2 (cid:21),(cid:22)1(cid:23) 11,119 1(cid:22),195 (4,090) 3,50(cid:21) (5,4(cid:23)0) (cid:38)er(cid:50)ent Ta(cid:71) (cid:38)er(cid:50)ent (cid:13)(cid:11)(cid:12)(cid:19) 21.0 (cid:5) (cid:4) (cid:86) (cid:5) (5.9) (cid:5) 4.(cid:23) (cid:5) 22.4 (cid:5) 1.(cid:22) (cid:5) 1.3 (cid:5) (12.0) (cid:5) (5.(cid:21)) (cid:5) (9.3) (cid:5) (14.3) (cid:5) 3.4 (cid:5) (2.9) (cid:5) 4.(cid:21) (cid:5) (cid:4) 23,(cid:22)(cid:21)1 (cid:86) ((cid:21),2(cid:22)3) 19,0(cid:21)4 (2(cid:21),2(cid:22)(cid:22)) ((cid:23),431) (2,105) (25,30(cid:22)) 1(cid:21),5(cid:22)0 4,(cid:21)3(cid:21) 14,11(cid:22) ((cid:22),5(cid:23)0) 1,2(cid:21)(cid:21) 3,441 21.0 (cid:5) (cid:86) (cid:5) (5.5) (cid:5) 1(cid:21).(cid:23) (cid:5) (23.2) (cid:5) ((cid:22).5) (cid:5) (1.9) (cid:5) (22.3) (cid:5) 14.(cid:21) (cid:5) 4.1 (cid:5) 12.5 (cid:5) ((cid:21).(cid:22)) (cid:5) 1.1 (cid:5) 3.0 (cid:5) During the years ended December 31, 2020, 2019, and 201(cid:23), we made net tax payments of (cid:4)22.2 million, (cid:4)34.(cid:22) million, and (cid:4)5(cid:23).(cid:23) million, respectively. 133 Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities calculated under U.S. GAAP and the amounts calculated for preparing our income tax returns. The items that gave rise to our deferred taxes as of December 31, 2020 and 2019 were as follows (in thousands): Deferred tax assets: Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net operating losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long(cid:12)term contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity in earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax assets, gross . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:48)aluation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax assets, net of valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax liabilities: Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment in foreign subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restricted marketable securities and derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisition accounting / basis difference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net deferred tax assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:4) 134,32(cid:23) (cid:4) 110,(cid:22)53 39,45(cid:23) 15,(cid:23)0(cid:21) 10,(cid:23)13 4,5(cid:23)(cid:22) 3,(cid:21)(cid:21)(cid:21) 3,0(cid:21)5 1,(cid:23)44 30,091 354,411 (12(cid:22),(cid:22)11) 22(cid:21),(cid:22)00 (103,324) (21,91(cid:22)) ((cid:21),32(cid:21)) (5,0(cid:22)9) (3,09(cid:22)) ((cid:21),529) (14(cid:21),2(cid:22)2) (cid:4) (cid:23)0,42(cid:23) (cid:4) 13,12(cid:22) 1(cid:21)5,(cid:21)(cid:21)9 134,(cid:22)91 22,401 11,215 4,020 2,90(cid:21) 5,55(cid:22) 2,1(cid:22)(cid:22) 20,143 3(cid:23)2,00(cid:21) (151,(cid:22)05) 230,301 ((cid:22)(cid:22),(cid:22)94) (5,554) (4,330) (5,35(cid:21)) (2,199) (10,(cid:22)90) (10(cid:21),023) 124,2(cid:22)(cid:23) We use the deferral method of accounting for investment tax credits under which the credits are recognized as reductions in the carrying value of the related assets. The use of the deferral method also results in a basis difference from the recognition of a deferred tax asset and an immediate income tax benefit for the future tax depreciation of the related assets. Such basis differences are accounted for pursuant to the income statement method. Changes in the valuation allowance against our deferred tax assets were as follows during the years ended December 31, 2020, 2019, and 201(cid:23) (in thousands): (cid:48)aluation allowance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reversals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:48)aluation allowance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) (cid:13)(cid:11)(cid:13)(cid:11) 151,(cid:22)05 (cid:4) 23,(cid:23)(cid:23)4 (4(cid:22),(cid:23)(cid:22)(cid:23)) 12(cid:22),(cid:22)11 (cid:4) (cid:13)(cid:11)(cid:12)(cid:20) 159,54(cid:21) (cid:4) 9,1(cid:21)1 (1(cid:22),002) 151,(cid:22)05 (cid:4) (cid:13)(cid:11)(cid:12)(cid:19) 143,(cid:23)1(cid:23) 29,359 (13,(cid:21)31) 159,54(cid:21) We maintained a valuation allowance of (cid:4)12(cid:22).(cid:22) million and (cid:4)151.(cid:22) million as of December 31, 2020 and 2019, respectively, against certain of our deferred tax assets, as it is more likely than not that such amounts will not be fully realized. During the year ended December 31, 2020, the valuation allowance decreased by (cid:4)24.0 million primarily due to the release of the valuation allowance associated with our (cid:48)ietnamese subsidiary due to its current year operating income, partially offset by an increase in valuation allowances due to current year operating losses in certain other (cid:61)urisdictions. 134 As of December 31, 2020, we had federal and aggregate state net operating loss carryforwards of (cid:4)10.(cid:23) million and (cid:4)(cid:22)22.(cid:23) million, respectively. As of December 31, 2019, we had federal and aggregate state net operating loss carryforwards of (cid:4)21(cid:23).3 million and (cid:4)205.(cid:21) million, respectively. If not used, the federal net operating loss carryforwards incurred prior to 201(cid:23) will begin to expire in 2030, and the state net operating loss carryforwards will begin to expire in 2029. Federal net operating losses arising in tax years beginning in 201(cid:23) may be carried forward indefinitely, and the associated deduction is limited to (cid:23)0(cid:5) of taxable income. The utilization of our net operating loss carryforwards is also sub(cid:61)ect to an annual limitation under Section 3(cid:23)2 of the Internal Revenue Code due to changes in ownership. Based on our analysis, we do not believe such limitation will impact our realization of the net operating loss carryforwards as we anticipate utilizing them prior to expiration. As of December 31, 2020, we had U.S. foreign tax credit carryforwards of (cid:4)2(cid:23).(cid:23) million, federal and state research and development credit carryforwards of (cid:4)(cid:22)1.(cid:22) million, and investment tax credits of (cid:4)5(cid:23).4 million available to reduce future federal and state income tax liabilities. If not used, these credits will begin to expire in 202(cid:23), 202(cid:22), and 2035, respectively. A reconciliation of the beginning and ending amount of liabilities associated with uncertain tax positions for the years ended December 31, 2020, 2019, and 201(cid:23) is as follows (in thousands): Unrecognized tax benefits, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . Increases related to prior year tax positions . . . . . . . . . . . . . . . . . . . . . . . . . Decreases related to prior year tax positions . . . . . . . . . . . . . . . . . . . . . . . . Decreases from lapse in statute of limitations . . . . . . . . . . . . . . . . . . . . . . . Increases related to current tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . Unrecognized tax benefits, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) (cid:22)2,1(cid:21)9 (cid:4) 1(cid:21)9 (25(cid:21)) ((cid:21)(cid:22),39(cid:21)) (cid:21)(cid:23)4 5,3(cid:22)0 (cid:4) (cid:22)2,193 (cid:4) (cid:23)00 (cid:86) (1,539) (cid:22)15 (cid:22)2,1(cid:21)9 (cid:4) (cid:23)4,1(cid:22)3 (cid:86) (2,9(cid:22)9) (10,(cid:22)04) 1,(cid:22)03 (cid:22)2,193 (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:19) If recognized, (cid:4)5.4 million of unrecognized tax benefits, excluding interest and penalties, would reduce our annual effective tax rate. Due to the uncertain and complex application of tax laws and regulations, it is possible that the ultimate resolution of uncertain tax positions may result in liabilities that could be materially different from these estimates. In such an event, we will record additional tax expense or benefit in the period in which such resolution occurs. Our policy is to recognize any interest and penalties that we may incur related to our tax positions as a component of income tax expense or benefit. During the years ended December 31, 2020, 2019, and 201(cid:23), we recognized interest and penalties of (cid:4)5.3 million, (cid:4)(cid:22).9 million, and (cid:4)5.3 million, respectively, related to unrecognized tax benefits. It is reasonably possible that (cid:4)0.4 million of uncertain tax positions will be recognized within the next 12 months due to the expiration of the statute of limitations associated with such positions. We are sub(cid:61)ect to audit by federal, state, local, and foreign tax authorities. We are currently under examination in Chile, India, Malaysia, and the state of California. We believe that adequate provisions have been made for any ad(cid:61)ustments that may result from tax examinations. However, the outcome of tax examinations cannot be predicted with certainty. If any issues addressed by our tax examinations are not resolved in a manner consistent with our expectations, we could be required to ad(cid:61)ust our provision for income taxes in the period such resolution occurs. The following table summarizes the tax years that are either currently under audit or remain open and sub(cid:61)ect to examination by the tax authorities in the most significant (cid:61)urisdictions in which we operate: (cid:48)ietnam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ta(cid:71) (cid:47)ear(cid:66) 2011 (cid:12) 2019 2015 (cid:12) 2019 2015 (cid:12) 2019 201(cid:22) (cid:12) 2019 135 In certain of the (cid:61)urisdictions noted above, we operate through more than one legal entity, each of which has different open years sub(cid:61)ect to examination. The table above presents the open years sub(cid:61)ect to examination for the most material of the legal entities in each (cid:61)urisdiction. Additionally, tax years are not closed until the statute of limitations in each (cid:61)urisdiction expires. In the (cid:61)urisdictions noted above, the statute of limitations can extend beyond the open years sub(cid:61)ect to examination. (cid:12)(cid:19). Net In(cid:50)(cid:62)(cid:60)e (cid:4)L(cid:62)(cid:66)(cid:66)(cid:5) (cid:63)er S(cid:55)are The calculation of basic and diluted net income (loss) per share for the years ended December 31, 2020, 2019, and 201(cid:23) was as follows (in thousands, except per share amounts): (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:19) Basic net income (loss) per share Numerator: Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) 39(cid:23),355 (cid:4) (114,933) (cid:4) 144,32(cid:21) Denominator: Weighted(cid:12)average common shares outstanding . . . . . . . . . . . . . . . . . . . . . . 105,(cid:23)(cid:21)(cid:22) 105,310 104,(cid:22)45 Diluted net income (loss) per share Denominator: Weighted(cid:12)average common shares outstanding . . . . . . . . . . . . . . . . . . . . . . Effect of restricted and performance stock units and stock purchase plan shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted(cid:12)average shares used in computing diluted net income (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,(cid:23)(cid:21)(cid:22) 105,310 104,(cid:22)45 (cid:23)19 (cid:86) 1,3(cid:21)(cid:23) 10(cid:21),(cid:21)(cid:23)(cid:21) 105,310 10(cid:21),113 Net income (loss) per share: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) (cid:4) 3.(cid:22)(cid:21) (cid:4) 3.(cid:22)3 (cid:4) (1.09) (cid:4) (1.09) (cid:4) 1.3(cid:23) 1.3(cid:21) The following table summarizes the potential shares of common stock that were excluded from the computation of diluted net income (loss) per share for the years ended December 31, 2020, 2019, and 201(cid:23) as such shares would have had an anti(cid:12)dilutive effect (in thousands): Anti(cid:12)dilutive shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:86) (cid:23)(cid:21)(cid:23) 299 (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:19) 13(cid:21) (cid:12)(cid:20). A(cid:50)(cid:50)u(cid:60)ulate(cid:51) Ot(cid:55)er C(cid:62)(cid:60)(cid:63)re(cid:55)en(cid:66)i(cid:69)e L(cid:62)(cid:66)(cid:66) The following table presents the changes in accumulated other comprehensive loss, net of tax, for the year ended December 31, 2020 (in thousands): Unreali(cid:73)e(cid:51) Gain (cid:4)L(cid:62)(cid:66)(cid:66)(cid:5) (cid:62)n (cid:35)ar(cid:58)eta(cid:49)le Se(cid:50)uritie(cid:66) an(cid:51) Re(cid:66)tri(cid:50)te(cid:51) (cid:35)ar(cid:58)eta(cid:49)le Se(cid:50)uritie(cid:66) F(cid:62)reign Curren(cid:50)(cid:72) Tran(cid:66)lati(cid:62)n A(cid:51)(cid:57)u(cid:66)t(cid:60)ent Unreali(cid:73)e(cid:51) Gain (cid:4)L(cid:62)(cid:66)(cid:66)(cid:5) (cid:62)n Deri(cid:69)ati(cid:69)e In(cid:66)tru(cid:60)ent(cid:66) T(cid:62)tal Balance as of December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . (cid:4) ((cid:22)3,429) (cid:4) (5,029) (cid:4) ((cid:23)(cid:22)(cid:21)) (cid:4) ((cid:22)9,334) Other comprehensive income (loss) before reclassifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 3(cid:23),23(cid:21) (2,409) 35,94(cid:22) Amounts reclassified from accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . Net tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net other comprehensive income (loss) . . . . . . . . . . . . . . . . . . Balance as of December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . (cid:4) (2,930) (cid:86) (2,(cid:23)10) ((cid:22)(cid:21),239) (cid:4) (15,34(cid:21)) (1,231) 21,(cid:21)59 1(cid:21),(cid:21)30 (cid:4) 1,199 (31) (1,241) (2,11(cid:22)) (cid:4) (1(cid:22),0(cid:22)(cid:22)) (1,2(cid:21)2) 1(cid:22),(cid:21)0(cid:23) ((cid:21)1,(cid:22)2(cid:21)) The following table presents the pretax amounts reclassified from accumulated other comprehensive loss into our consolidated statements of operations for the years ended December 31, 2020, 2019, and 201(cid:23) (in thousands): C(cid:62)(cid:60)(cid:63)re(cid:55)en(cid:66)i(cid:69)e In(cid:50)(cid:62)(cid:60)e C(cid:62)(cid:60)(cid:63)(cid:62)nent(cid:66) Foreign currency translation ad(cid:61)ustment: In(cid:50)(cid:62)(cid:60)e State(cid:60)ent Line Ite(cid:60) (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:19) Foreign currency translation ad(cid:61)ustment . Cost of sales Foreign currency translation ad(cid:61)ustment . Other (expense) income, net Total foreign currency translation ad(cid:61)ustment . . . . . . . . . . . . . . . . . . . . . . . . Unrealized gain on marketable securities and (cid:4) 3(cid:22)0 (cid:4) 2,5(cid:21)0 2,930 1,190 (cid:4) (cid:86) 1,190 (cid:86) (cid:86) (cid:86) restricted marketable securities . . . . . . . . Other (expense) income, net 15,34(cid:21) 40,(cid:21)21 55,405 Unrealized (loss) gain on derivative contracts: Foreign exchange forward contracts . . . . Net sales Foreign exchange forward contracts . . . . Cost of sales Foreign exchange forward contracts . . . . Foreign currency (loss) income, net Foreign exchange forward contracts . . . . Other (expense) income, net Total unrealized (loss) gain on derivative contracts . . . . . . . . . . . . . . . . . . . . . . . . . Total gain reclassified . . . . . . . . . . . . . . . . . . (cid:13)(cid:11). Seg(cid:60)ent an(cid:51) Ge(cid:62)gra(cid:63)(cid:55)i(cid:50)al In(cid:53)(cid:62)r(cid:60)ati(cid:62)n (cid:86) (1,199) (cid:86) (cid:86) 124 1,0(cid:23)1 (cid:86) (cid:86) (1,(cid:21)9(cid:23)) (212) (5,44(cid:23)) 54(cid:21) (1,199) 1(cid:22),0(cid:22)(cid:22) (cid:4) 1,205 43,01(cid:21) (cid:4) ((cid:21),(cid:23)12) 4(cid:23),593 (cid:4) We operate our business in two segments. Our modules segment involves the design, manufacture, and sale of CdTe solar modules, which convert sunlight into electricity. Third(cid:12)party customers of our modules segment include integrators and operators of P(cid:48) solar power systems. Our second segment is our systems segment, through which we provide power plant solutions in certain markets, which include (i) pro(cid:61)ect development, (ii) EPC services, and (iii) O(cid:6)M services. We may provide any combination of individual products and services within such capabilities (including, with respect to EPC services, by contracting with third parties) depending upon the customer and market opportunity. Our systems segment customers include utilities, independent power producers, commercial and industrial companies, and other system owners. From time to time, we may temporarily own and operate, or retain interests in, certain of our systems for a period of time based on strategic opportunities or market factors. 13(cid:22) In August 2020 we entered into an agreement with a subsidiary of Clairvest for the sale of our North American O(cid:6)M operations. The completion of the transaction is contingent on a number of closing conditions, including the receipt of certain third(cid:12)party consents and other customary closing conditions. Assuming satisfaction of such closing conditions, we expect the sale to be completed in the first half of 2021. In January 2021, we entered into an agreement with OMERS for the sale of our U.S. pro(cid:61)ect development business. The completion of the transaction is contingent on a number of closing conditions, including the receipt of regulatory approval from FERC, the expiration of the mandatory waiting period under U.S. antitrust laws, a review of the transaction by CFIUS, and other customary closing conditions. Assuming satisfaction of such closing conditions, we expect the sale to be completed in the first half of 2021. Our segments are managed by our Chief Executive Officer, who is also considered our chief operating decision maker ((cid:87)CODM(cid:88)). Our CODM views sales of solar modules or systems as the primary drivers of our resource allocation, profitability, and cash flows. Our modules segment contributes to our operating results by providing the fundamental technologies and solar modules that drive our business and sales opportunities, and our systems segment contributes to our operating results by using such modules as part of a range of P(cid:48) solar energy solutions, depending on the customer and market opportunity. Our CODM generally makes decisions about allocating resources to our segments and assessing their performance based on gross profit. However, information about segment assets is not reported to the CODM for purposes of making such decisions. Accordingly, we exclude such asset information from our reportable segment financial disclosures. The following tables present certain financial information for our reportable segments for the years ended December 31, 2020, 2019, and 201(cid:23) (in thousands): Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) 1,(cid:22)3(cid:21),0(cid:21)0 (cid:4) 429,131 1(cid:23)1,402 14,4(cid:21)2 9(cid:22)5,2(cid:22)2 (cid:4) 2,(cid:22)11,332 (cid:21)(cid:23)0,(cid:21)(cid:22)3 251,542 202,215 20,(cid:23)13 14,4(cid:21)2 (cid:86) (cid:47)ear En(cid:51)e(cid:51) De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:13)(cid:11) (cid:35)(cid:62)(cid:51)ule(cid:66) S(cid:72)(cid:66)te(cid:60)(cid:66) T(cid:62)tal (cid:47)ear En(cid:51)e(cid:51) De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:12)(cid:20) Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . T(cid:62)tal (cid:35)(cid:62)(cid:51)ule(cid:66) S(cid:72)(cid:66)te(cid:60)(cid:66) (cid:4) 1,4(cid:21)0,11(cid:21) (cid:4) 1,(cid:21)03,001 (cid:4) 3,0(cid:21)3,11(cid:22) 549,212 1(cid:23)3,(cid:22)01 14,4(cid:21)2 259,133 21,(cid:22)0(cid:23) (cid:86) 290,0(cid:22)9 1(cid:21)1,993 14,4(cid:21)2 Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross (loss) profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:4) 502,001 (cid:4) 1,(cid:22)42,043 (cid:4) 2,244,044 392,1(cid:22)(cid:22) 442,(cid:21)44 (50,4(cid:21)(cid:22)) 104,444 1(cid:23),(cid:21)4(cid:22) (cid:23)5,(cid:22)9(cid:22) (cid:47)ear En(cid:51)e(cid:51) De(cid:50)e(cid:60)(cid:49)er (cid:14)(cid:12), (cid:13)(cid:11)(cid:12)(cid:19) (cid:35)(cid:62)(cid:51)ule(cid:66) S(cid:72)(cid:66)te(cid:60)(cid:66) T(cid:62)tal 13(cid:23) The following table presents net sales for the years ended December 31, 2020, 2019, and 201(cid:23) by geographic region, based on the customer country of invoicing (in thousands): United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . All other foreign countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:13)(cid:11)(cid:12)(cid:19) (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:4) 1,(cid:23)43,433 (cid:4) 2,(cid:21)59,940 (cid:4) 1,4(cid:22)(cid:23),034 234,(cid:23)14 2(cid:23),(cid:22)9(cid:21) 5,391 232,130 153,1(cid:21)3 111,(cid:22)1(cid:21) (cid:4) 2,(cid:22)11,332 (cid:4) 3,0(cid:21)3,11(cid:22) (cid:4) 2,244,044 4(cid:21)9,(cid:21)5(cid:22) 12(cid:22),09(cid:22) 11(cid:23),(cid:23)(cid:21)5 33,(cid:23)4(cid:23) 20,(cid:22)(cid:23)(cid:23) 9(cid:22),(cid:21)44 34,234 (cid:23)(cid:23),(cid:23)1(cid:21) 5,944 (cid:22),451 13(cid:23),32(cid:22) 12(cid:23),405 The following table presents long(cid:12)lived assets, which include property, plant and equipment, P(cid:48) solar power systems, pro(cid:61)ect assets (current and noncurrent), and operating lease assets as of December 31, 2020 and 2019 by geographic region, based on the physical location of the assets (in thousands): United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:48)ietnam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . All other foreign countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long(cid:12)lived assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:4) 1,043,954 (cid:4) 1,0(cid:22)(cid:22),593 (cid:21)3(cid:22),322 (cid:21)99,(cid:23)41 41(cid:21),3(cid:22)5 234,4(cid:22)0 (cid:22)5,35(cid:21) (cid:4) 3,245,(cid:22)22 (cid:4) 3,140,95(cid:22) (cid:23)(cid:22)(cid:23),0(cid:21)4 (cid:21)(cid:22)0,440 3(cid:23)2,(cid:23)23 224,(cid:21)(cid:21)(cid:21) 45,(cid:22)(cid:22)5 (cid:13)(cid:12). C(cid:62)n(cid:50)entrati(cid:62)n(cid:66) (cid:62)(cid:53) Ri(cid:66)(cid:58)(cid:66) Customer Concentration Risk. The following customers each comprised 10(cid:5) or more of our total net sales for the years ended December 31, 2020, 2019, and 201(cid:23): (cid:13)(cid:11)(cid:13)(cid:11) (cid:13)(cid:11)(cid:12)(cid:20) (cid:13)(cid:11)(cid:12)(cid:19) Customer (cid:3)1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customer (cid:3)2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customer (cid:3)3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customer (cid:3)4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customer (cid:3)5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (cid:2) (cid:62)(cid:53) Net Sale(cid:66) (cid:2) (cid:62)(cid:53) Net Sale(cid:66) (cid:2) (cid:62)(cid:53) Net Sale(cid:66) (cid:9) (cid:9) (cid:9) 1(cid:21) (cid:5) 13 (cid:5) 11 (cid:5) 10 (cid:5) (cid:9) (cid:9) (cid:9) (cid:9) (cid:9) 1(cid:21) (cid:5) (cid:9) (cid:9) (cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86) (cid:9) Net sales for these customers were less than 10(cid:5) of our total net sales for the period. Geographic Risk. During the year ended December 31, 2020, our third(cid:12)party solar module net sales were predominantly in the United States and France and our solar power system net sales were predominantly in the United States and Japan. The concentration of our net sales in a limited number of geographic regions exposes us to local economic, public policy, and regulatory risks in such regions. Production Risk. Our products include components that are available from a limited number of suppliers or sources. Shortages of essential components could occur due to increases in demand or interruptions of supply, thereby adversely affecting our ability to meet customer demand for our products. Our solar modules are currently produced at our facilities in Perrysburg, Ohio(cid:26) Lake Township, Ohio(cid:26) Kulim, Malaysia(cid:26) and Ho Chi Minh City, (cid:48)ietnam. Damage to or disruption of these facilities could interrupt our business and adversely affect our ability to generate net sales. 139 The following exhibits are filed with or incorporated by reference into this Annual Report on Form 10(cid:12)K: INDE(cid:46) TO E(cid:46)(cid:30)I(cid:24)ITS E(cid:71)(cid:55)i(cid:49)it Nu(cid:60)(cid:49)er 3.1 3.2 4.1 (cid:10)10.1 10.2 10.3 10.4 10.5 10.(cid:21) 10.(cid:22) 10.(cid:23) 10.9 10.10 10.11 10.12 (cid:10)10.13 E(cid:71)(cid:55)i(cid:49)it De(cid:66)(cid:50)ri(cid:63)ti(cid:62)n Amended and Restated Certificate of Incorporation of First Solar, Inc. Amended and Restated Bylaws of First Solar, Inc. Description of the Registrant(cid:89)s Securities Form of Change in Control Severance Agreement Form of Director and Officer Indemnification Agreement Credit Agreement, dated as of September 4, 2009, among First Solar, Inc., First Solar Manufacturing GmbH, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America and The Royal Bank of Scotland plc, as Documentation Agents, and Credit Suisse, Cayman Islands Branch, as Syndication Agent Charge of Company Shares, dated as of September 4, 2009, between First Solar, Inc., as Chargor, and JPMorgan Chase Bank, N.A., as Security Agent, relating to (cid:21)(cid:21)(cid:5) of the shares of First Solar FE Holdings Pte. Ltd. (Singapore) German Share Pledge Agreements, dated as of September 4, 2009, between First Solar, Inc., First Solar Holdings GmbH, First Solar Manufacturing GmbH, First Solar GmbH, and JPMorgan Chase Bank, N.A., as Administrative Agent Guarantee and Collateral Agreement, dated as of September 4, 2009, by First Solar, Inc. in favor of JPMorgan Chase Bank, N.A., as Administrative Agent Guarantee, dated as of September (cid:23), 2009, between First Solar Holdings GmbH, First Solar GmbH, First Solar Manufacturing GmbH, as German Guarantors, and JPMorgan Chase Bank, N.A., as Administrative Agent Assignment Agreement, dated as of September 4, 2009, between First Solar Holdings GmbH and JPMorgan Chase Bank, N.A., as Administrative Agent Assignment Agreement, dated as of September 4, 2009, between First Solar GmbH and JPMorgan Chase Bank, N.A., as Administrative Agent Assignment Agreement, dated as of September (cid:23), 2009, between First Solar Manufacturing GmbH and JPMorgan Chase Bank, N.A., as Administrative Agent Security Trust Agreement, dated as of September 4, 2009, between First Solar, Inc., First Solar Holdings GmbH, First Solar GmbH, First Solar Manufacturing GmbH, as Security Grantors, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other Secured Parties party thereto Amended and Restated Credit Agreement, dated as of October 15, 2010, among First Solar, Inc., the borrowing subsidiaries party thereto, the lenders party thereto, Bank of America N.A. and The Royal Bank of Scotland PLC, as documentation agents, Credit Suisse, Cayman Islands Branch, as syndication agent and JPMorgan Chase Bank, N.A., as administrative agent Employment Agreement, dated March 15, 2011, and Change in Control Severance Agreement, dated April 4, 2011 between First Solar, Inc. and Mark Widmar In(cid:50)(cid:62)r(cid:63)(cid:62)rate(cid:51) (cid:49)(cid:72) Re(cid:53)eren(cid:50)e F(cid:62)r(cid:60) S(cid:12)1/A 333(cid:12)1355(cid:22)4 File N(cid:62). Date (cid:62)(cid:53) Fir(cid:66)t Filing 10/25/0(cid:21) E(cid:71)(cid:55)i(cid:49)it Nu(cid:60)(cid:49)er 3.1 001(cid:12)3315(cid:21) 10(cid:12)(cid:43) 10(cid:12)K 001(cid:12)3315(cid:21) S(cid:12)1/A 333(cid:12)1355(cid:22)4 001(cid:12)3315(cid:21) 10(cid:12)K 001(cid:12)3315(cid:21) (cid:23)(cid:12)K 5/5/1(cid:22) 2/21/20 10/25/0(cid:21) 2/2(cid:22)/13 9/10/09 3.1 4.1 10.15 10.20 10.1 (cid:23)(cid:12)K 001(cid:12)3315(cid:21) 9/10/09 10.2 (cid:23)(cid:12)K 001(cid:12)3315(cid:21) 9/10/09 10.3 (cid:23)(cid:12)K 001(cid:12)3315(cid:21) 9/10/09 10.4 (cid:23)(cid:12)K 001(cid:12)3315(cid:21) 9/10/09 10.5 (cid:23)(cid:12)K 001(cid:12)3315(cid:21) 9/10/09 10.(cid:21) (cid:23)(cid:12)K 001(cid:12)3315(cid:21) 9/10/09 10.(cid:22) (cid:23)(cid:12)K 001(cid:12)3315(cid:21) 9/10/09 10.(cid:23) (cid:23)(cid:12)K 001(cid:12)3315(cid:21) 9/10/09 10.9 (cid:23)(cid:12)K 001(cid:12)3315(cid:21) 10/20/10 10.1 10(cid:12)(cid:43) 001(cid:12)3315(cid:21) 5/5/11 10.3 140 E(cid:71)(cid:55)i(cid:49)it Nu(cid:60)(cid:49)er 10.14 10.15 (cid:10)10.1(cid:21) 10.1(cid:22) (cid:10)10.1(cid:23) (cid:10)10.19 10.20 10.21 (cid:10)10.22 10.23 (cid:10)10.24 10.25 (cid:10)10.2(cid:21) (cid:10)10.2(cid:22) E(cid:71)(cid:55)i(cid:49)it De(cid:66)(cid:50)ri(cid:63)ti(cid:62)n First Amendment, dated as of May (cid:21), 2011, to the Amended and Restated Credit Agreement, dated as of October 15, 2010, among First Solar, Inc., the borrowing subsidiaries party thereto, the lenders party thereto, Bank of America, N.A. and The Royal Bank of Scotland plc, as documentation agents, Credit Suisse, Cayman Islands Branch, as syndication agent, and JPMorgan Chase Bank, N.A., as administrative agent Second Amendment and Waiver, dated as of June 30, 2011, to the Amended and Restated Credit Agreement, dated as of October 15, 2010, among First Solar, Inc., the lenders party thereto, Bank of America, N.A. and The Royal Bank of Scotland plc, as documentation agents, Credit Suisse, Cayman Islands Branch, as syndication agent, and JPMorgan Chase Bank, N.A., as administrative agent Employment Agreement, effective July 1, 2012, and Change in Control Severance Agreement, effective July 1, 2012 between First Solar, Inc. and Georges Antoun Third Amendment, dated as of October 23, 2012 to the Amended and Restated Credit Agreement dated as of October 15, 2010, among First Solar, Inc., the lenders party thereto, Bank of America, N.A. and The Royal Bank of Scotland plc, as documentation agents, Credit Suisse, Cayman Islands Branch, as syndication agent, and JPMorgan Chase Bank, N.A., as administrative agent Non(cid:12)Competition and Non(cid:12)Solicitation Agreement, effective as of March 15, 2011, between First Solar, Inc. and Mark Widmar Change in Control Severance Agreement, effective as of July 1, 2012, between First Solar, Inc. and Georges Antoun Fourth Amendment dated as of July 15, 2013, to the Amended and Restated Credit Agreement, dated as of October 15, 2010, among First Solar, Inc., the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent Amended and Restated Guarantee and Collateral Agreement, dated as of July 15, 2013, by First Solar, Inc., First Solar Electric, LLC, First Solar Electric (California), Inc. and First Solar Development, LLC in favor of JPMorgan Chase Bank, N.A., as administrative agent Amendment to Change in Control Severance Agreement Restricted Cash Assignment of Deposits First Solar, Inc. 2015 Omnibus Incentive Compensation Plan Fifth Amendment, dated as of June 3, 2015, to the Amended and Restated Credit Agreement, dated as of October 15, 2010, among First Solar, Inc., the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent Employment Agreement, effective as of July 25, 2011, and Change in Control Severance Agreement, effective as of October 25, 2011 and amended as of August 1, 2013, between First Solar, Inc. and Philip Tymen deJong Amendment to Employment Agreement, effective as of July 1, 201(cid:21), between First Solar, Inc. and Mark Widmar, and and Non(cid:12)Solicitation Amendment Agreement, effective as of July 1, 201(cid:21), between First Solar, Inc. and Mark Widmar, and Second Amendment to Change(cid:12)in(cid:12) Control Severance Agreement, effective as of July 1, 201(cid:21), between First Solar, Inc. and Mark Widmar to Non(cid:12)Competition In(cid:50)(cid:62)r(cid:63)(cid:62)rate(cid:51) (cid:49)(cid:72) Re(cid:53)eren(cid:50)e F(cid:62)r(cid:60) (cid:23)(cid:12)K File N(cid:62). 001(cid:12)3315(cid:21) Date (cid:62)(cid:53) Fir(cid:66)t Filing 5/12/11 E(cid:71)(cid:55)i(cid:49)it Nu(cid:60)(cid:49)er 10.1 (cid:23)(cid:12)K 001(cid:12)3315(cid:21) (cid:22)/14/11 10.1 10(cid:12)(cid:43) 001(cid:12)3315(cid:21) (cid:23)/3/12 10.1 (cid:23)(cid:12)K 001(cid:12)3315(cid:21) 10/2(cid:21)/12 10.1 10(cid:12)(cid:43) 001(cid:12)3315(cid:21) 5/(cid:22)/13 10(cid:12)(cid:43) 001(cid:12)3315(cid:21) 5/(cid:22)/13 (cid:23)(cid:12)K 001(cid:12)3315(cid:21) (cid:22)/19/13 10.2 10.3 10.1 (cid:23)(cid:12)K 001(cid:12)3315(cid:21) (cid:22)/19/13 10.2 10(cid:12)(cid:43) 10(cid:12)(cid:43) DEF 14A (cid:23)(cid:12)K 001(cid:12)3315(cid:21) 001(cid:12)3315(cid:21) 001(cid:12)3315(cid:21) (cid:23)/(cid:22)/13 (cid:23)/(cid:21)/14 4/(cid:23)/15 10.1 10.2 App. A 001(cid:12)3315(cid:21) (cid:21)/5/15 10.1 10(cid:12)K 001(cid:12)3315(cid:21) 2/24/1(cid:21) 10.23 10(cid:12)(cid:43) 001(cid:12)3315(cid:21) 4/2(cid:23)/1(cid:21) 10.1 141 E(cid:71)(cid:55)i(cid:49)it Nu(cid:60)(cid:49)er (cid:10)10.2(cid:23) 10.29 10.30 (cid:10)10.31 (cid:10)10.32 (cid:10)10.33 (cid:10)10.34 (cid:10)10.35 (cid:10)10.3(cid:21) (cid:10)10.3(cid:22) (cid:10)10.3(cid:23) (cid:10)10.39 (cid:10)10.40 (cid:10)10.41 (cid:10)10.42 (cid:10)10.43 (cid:10)10.44 E(cid:71)(cid:55)i(cid:49)it De(cid:66)(cid:50)ri(cid:63)ti(cid:62)n Employment Agreement, effective as of October 24, 201(cid:21), and Change(cid:12)in(cid:12)Control Severance Agreement, effective as of October 24, 201(cid:21), between First Solar, Inc. and Alexander Bradley Sixth Amendment, dated as of January 20, 201(cid:22), to the Amended and Restated Credit Agreement, dated as of October 15, 2010, among First Solar, Inc., the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent Second Amended and Restated Credit Agreement, dated as of July 10, 201(cid:22), among First Solar, Inc., the borrowing subsidiaries party thereto, the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent Form of Grant Notice for Executive Performance Equity Plan Form of Grant Notice for CEO Leadership Equity Plan Form of Performance Unit Award Agreement (cid:12) Form Perf Unit(cid:12)00(cid:23) Form of Performance Unit Award Agreement (cid:12) Form Perf Unit(cid:12)009 Form of Grant Notice for 2019(cid:12)2021 Executive Performance Equity Plan In Control Severance Employment Agreement, Change Agreement, Confidentiality Property and Agreement, and Non(cid:12)Competition and Non(cid:12)Solicitation Agreement, effective as of October (cid:22), 2019 between First Solar, Inc. and Caroline Stockdale Intellectual Form of Performance Unit Award Agreement (cid:12) Form Perf Unit(cid:12)010 First Solar, Inc. 2020 Omnibus Incentive Compensation Plan Intellectual Form of Grant Notice for 2020(cid:12)2022 Executive Performance Equity Plan Employment Agreement, First Amendment to Employment Agreement, Change In Control Severance Agreement, Confidentiality and Intellectual Property Agreement, and Non(cid:12) Competition and Non(cid:12)Solicitation Agreement, effective as of August 10, 2020 between First Solar, Inc. and Patrick Buehler In Control Severance Employment Agreement, Change Agreement, Confidentiality Property and Agreement, and Non(cid:12)Competition and Non(cid:12)Solicitation Agreement, effective as of August 10, 2020 between First Solar, Inc. and Jason Dymbort In Control Severance Employment Agreement, Change Agreement, Confidentiality Property and Agreement, and Non(cid:12)Competition and Non(cid:12)Solicitation Agreement, effective as of August 10, 2020 between First Solar, Inc. and Markus Gloeckler Employment Agreement, First Amendment to Employment Agreement, Change In Control Severance Agreement, Confidentiality and Intellectual Property Agreement, and Non(cid:12) Competition and Non(cid:12)Solicitation Agreement, effective as of August 10, 2020 between First Solar, Inc. and Michael Koralewski First Amendment to Employment Agreement, effective as of October (cid:23), 2020 between First Solar, Inc. and Caroline Stockdale Intellectual In(cid:50)(cid:62)r(cid:63)(cid:62)rate(cid:51) (cid:49)(cid:72) Re(cid:53)eren(cid:50)e F(cid:62)r(cid:60) 10(cid:12)(cid:43) File N(cid:62). 001(cid:12)3315(cid:21) Date (cid:62)(cid:53) Fir(cid:66)t Filing 11/3/1(cid:21) E(cid:71)(cid:55)i(cid:49)it Nu(cid:60)(cid:49)er 10.1 (cid:23)(cid:12)K 001(cid:12)3315(cid:21) 1/2(cid:22)/1(cid:22) 10.1 (cid:23)(cid:12)K 001(cid:12)3315(cid:21) (cid:22)/14/1(cid:22) 10.1 10(cid:12)(cid:43) 10(cid:12)(cid:43) 10(cid:12)(cid:43) 001(cid:12)3315(cid:21) 001(cid:12)3315(cid:21) 001(cid:12)3315(cid:21) (cid:22)/2(cid:22)/1(cid:23) (cid:22)/2(cid:22)/1(cid:23) (cid:22)/2(cid:22)/1(cid:23) 10.1 10.2 10.3 10(cid:12)K 001(cid:12)3315(cid:21) 2/22/19 10.45 10(cid:12)(cid:43) 001(cid:12)3315(cid:21) 10/24/19 10.1 10(cid:12)K 001(cid:12)3315(cid:21) 2/21/20 10.34 10(cid:12)K 001(cid:12)3315(cid:21) 2/21/20 10.4(cid:21) DEF 14A 10(cid:12)(cid:43) 001(cid:12)3315(cid:21) 4/1/20 App. A 001(cid:12)3315(cid:21) 5/(cid:23)/20 10.1 10(cid:12)(cid:43) 001(cid:12)3315(cid:21) 10/2(cid:23)/20 10.1 10(cid:12)(cid:43) 001(cid:12)3315(cid:21) 10/2(cid:23)/20 10.2 10(cid:12)(cid:43) 001(cid:12)3315(cid:21) 10/2(cid:23)/20 10.3 10(cid:12)(cid:43) 001(cid:12)3315(cid:21) 10/2(cid:23)/20 10.4 10(cid:12)(cid:43) 001(cid:12)3315(cid:21) 10/2(cid:23)/20 10.5 142 E(cid:71)(cid:55)i(cid:49)it Nu(cid:60)(cid:49)er (cid:10)10.45 (cid:9)(cid:10)10.4(cid:21) (cid:9)(cid:10)10.4(cid:22) (cid:9)(cid:10)10.4(cid:23) (cid:9)(cid:10)10.49 (cid:9)(cid:10)10.50 (cid:9)(cid:10)10.51 (cid:9)(cid:10)10.52 (cid:9)21.1 (cid:9)23.1 (cid:9)31.01 (cid:9)31.02 (cid:79)32.01 (cid:9)101.INS E(cid:71)(cid:55)i(cid:49)it De(cid:66)(cid:50)ri(cid:63)ti(cid:62)n Employment Agreement, First Amendment to Employment In Control Severance Agreement, Agreement, Change Confidentiality and Intellectual Property Agreement, and Non(cid:12) Competition and Non(cid:12)Solicitation Agreement, effective as of August 10, 2020 between First Solar, Inc. and Kuntal Kumar (cid:48)erma First Amendment to Employment Agreement, effective as of January (cid:23), 2021 between First Solar, Inc. and Markus Gloeckler Form of Performance Unit Award Agreement (cid:12) Form Perf Unit(cid:12)011 Form of Performance Unit Award Agreement (cid:12) Form Perf Unit(cid:12)012 Form of RSU Award Agreement Form of Option Award Agreement Form of Share Award Agreement Form of Cash Incentive Award Agreement List of Subsidiaries of First Solar, Inc. Consent of Independent Registered Public Accounting Firm Certification of Chief Executive Officer pursuant to Rule 13a(cid:12)14(a) and 15d(cid:12)14(a), as amended Certification of Chief Financial Officer pursuant to Rule 13a(cid:12)14(a) and 15d(cid:12)14(a), as amended Certification of Chief Executive Officer and Chief Financial Officer pursuant to 1(cid:23) U.S.C. Section 1350, as adopted pursuant to Section 90(cid:21) of the Sarbanes(cid:12)Oxley Act of 2002 XBRL Instance Document (cid:85) the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document (cid:9)101.SCH XBRL Taxonomy Extension Schema Document (cid:9)101.CAL XBRL Taxonomy Extension Calculation Linkbase Document (cid:9)101.DEF XBRL Taxonomy Extension Definition Linkbase Document (cid:9)101.LAB XBRL Taxonomy Label Linkbase Document (cid:9)101.PRE XBRL Taxonomy Extension Presentation Document (cid:9)104 Cover page formatted as Inline XBRL and contained in Exhibit 101 (cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86)(cid:86) Filed herewith. (cid:9) In(cid:50)(cid:62)r(cid:63)(cid:62)rate(cid:51) (cid:49)(cid:72) Re(cid:53)eren(cid:50)e F(cid:62)r(cid:60) 10(cid:12)(cid:43) File N(cid:62). 001(cid:12)3315(cid:21) Date (cid:62)(cid:53) Fir(cid:66)t Filing 10/2(cid:23)/20 E(cid:71)(cid:55)i(cid:49)it Nu(cid:60)(cid:49)er 10.(cid:21) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:86) (cid:79) Furnished herewith. This exhibit shall not be deemed (cid:87)filed(cid:88) for purposes of Section 1(cid:23) of the Securities Exchange Act of 1934 or otherwise sub(cid:61)ect to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings. (cid:10) Management contract, compensatory plan, or arrangement. Ite(cid:60) (cid:12)(cid:17). Form 10-K Summary None. 143 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SIGNATURES February 25, 2021 FIRST SOLAR, INC. By: Name: Title: /s/ BYRON JEFFERS Byron Jeffers Chief Accounting Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ MARK R. WIDMAR Mark R. Widmar /s/ ALEXANDER R. BRADLEY Alexander R. Bradley /s/ MICHAEL J. AHEARN Michael J. Ahearn /s/ SHARON L. ALLEN Sharon L. Allen /s/ RICHARD D. CHAPMAN Richard D. Chapman /s/ GEORGE A. HAMBRO George A. Hambro /s/ MOLLY E. JOSEPH Molly E. Joseph /s/ CRAIG KENNEDY Craig Kennedy /s/ WILLIAM J. POST William J. Post /s/ PAUL H. STEBBINS Paul H. Stebbins /s/ MICHAEL SWEENEY Michael Sweeney Chief Executive Officer and Director February 25, 2021 Chief Financial Officer February 25, 2021 Chairman of the Board of Directors February 25, 2021 February 25, 2021 February 25, 2021 February 25, 2021 February 25, 2021 February 25, 2021 February 25, 2021 February 25, 2021 February 25, 2021 Director Director Director Director Director Director Director Director 144 Corporate Information EXECUTIVE MANAGEMENT Mark Widmar, Chief Executive Officer Alex Bradley, Chief Financial Officer Georges Antoun, Chief Commercial Officer Michael Koralewski, Chief Manufacturing Operations Officer Kuntal Kumar Verma, Chief Manufacturing Engineering Officer Pat Buehler, Chief Quality and Reliability Officer Markus Gloeckler, Chief Technology Officer Caroline Stockdale, Chief People and Communications Officer Jason Dymbort, General Counsel & Secretary BOARD OF DIRECTORS Michael J. Ahearn, Chairman of the Board Sharon L. Allen, Independent Director Richard Chapman, Independent Director George Hambro, Independent Director Kathryn A. Hollister, Independent Director Molly Joseph, Independent Director Craig Kennedy, Independent Director William J. Post, Independent Director Paul H. Stebbins, Independent Director Michael Sweeney, Independent Director Mark Widmar, Director and Chief Executive Officer INVESTOR RELATIONS 350 West Washington Street Suite 600 Tempe, AZ 85281 investor@firstsolar.com STOCK LISTING First Solar, Inc. common stock is traded on the Nasdaq Global Select Market, listed under FSLR. CORPORATE HEADQUARTERS 350 West Washington Street Suite 600 Tempe, AZ 85281 Telephone +1 602 414 9300 Facsimile +1 602 414 9400 info@firstsolar.com www.firstsolar.com TRANSFER AGENT Computershare Trust Company, N.A. P.O. Box 505000 Louisville, KY 40233-5002 Stockholder Services: +1 800 962 4284 www.computershare.com INDEPENDENT AUDITORS PricewaterhouseCoopers LLP First Solar, the First Solar logo, and Leading the World’s Sustainable Energy Future are trademarks of First Solar, Inc., registered in the U.S. and other countries. Series 6, Series 6 Plus, CuRe, Series 6 CuRe, and the Series 6 CuRe logo are trademarks of First Solar, Inc. FIRST SOLAR | ANNUAL REPORT 2020 About First Solar First Solar is a leading global provider of comprehensive photovoltaic (PV) solar solutions, which use its advanced module and system technology. The company’s integrated power plant solutions deliver an economically attractive alternative to fossil- fuel electricity generation today. From raw material sourcing through end-of-life module recycling, First Solar’s renewable energy solutions protect and enhance the environment. FIRST SOLAR | ANNUAL REPORT 2020 Corporate Headquarters 350 West Washington Street, Suite 600 Tempe, AZ 85281 USA Telephone: +1 602 414 9300 Facsimile: +1 602 414 9400 info@firstsolar.com www.firstsolar.com All financial numbers in this report are based on U.S. Generally Accepted Accounting Principles. This letter contains statements other than statements of historical fact, which are subject to risks, uncertainties and other factors as described the company’s filings with Securities and Exchange Commission. These forward-looking statements are qualified in their entirety by the cautionary statements and risk factors contained in the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. ANNUAL REPORT 2020 

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